Has Scotland’s ‘land rush bubble’ burst?

The rural “land rush” in Scotland is slowing down, according to financial experts. Financial Times reported that the high purchase prices for Scottish estates, which have characterised the past few years, will continue to fall as the “bubble for natural capital bursts”. 

Prices have risen over the past decade, initially due to demand for estates from wealthy rewilders such as Scotland’s largest landowner, Anders Povlsen. Then fund managers took an interest in the Scottish land market, investing in commercial forestry and peatland restoration, eyeing incentivised schemes for voluntary carbon credits to offset UK-based emissions. This continued to push up prices. 

Between 2021 and 2022, applications for natural capital schemes to the Woodland Carbon Code, a UK-government backed body that oversees woodland creation projects, accelerated, contributing to a spike in land prices. The value of hill land quadrupled and that of estates trebled from 2018 to 2021. 

However, institutional investors say it has now topped out and the slump is indicative of a market that, despite its potential, has yet to mature. This cooling of demand for Scottish estates has been fuelled by questions over the validity of carbon credits, weaker economic conditions and delays in forestry scheme approvals. 

In June, the Scottish Land Commission (SLC) released its Rural Market Insights Report 2024, which covers patterns of land sales in Scotland from the previous year. SLC noted that land market activity had slowed down considerably, with all sectors experiencing this to at least some degree. SLC said that the slowing was “most noticeable in the forestry sector, particularly for bare hill ground where values fell dramatically, and demand cooled significantly”, and suggested measures such as the Land Reform Bill be introduced to mitigate this decline. The Bill could force landowners of 3,000 hectares or more into community engagement schemes when they look to sell their holdings. 

Stephen Young, director of policy at Scottish Land & Estates, said: “The Scottish Land Commission’s report notes the slowdown in the rural land market in 2023, compared with 2020-21, and claims that this demonstrates a need for new legislative measures such as those contained within the draft Land Reform Bill. 

“In reality, many current land reform recommendations are based on assumptions from single-year reports in the past, which give an unrealistic impression of the long-term drivers and trends in the land market, use and ownership. 

“The need for further legislation is not a view that is shared by rural and landowning businesses,” he added.