WITH Spring now hopefully well on the horizon, there are changes facing the rural landscape as 2023 goes on.

Global market fluctuations mean companies are becoming more risk averse and at home, changing UK governments and leaders have created uncertainty in the agricultural industry and rural property market.

The Russia/Ukraine conflict has caused major impact on commodity markets, with the increased costs of inputs like fertilisers and fuel, reduced the margin of profitability for many agricultural businesses. Whilst inflation may have peaked, increased prices will continue to impact the industry, but will it impact property prices?

Davidson and Robertson director and head of rural and agency, Lewis Anderson, said: “The limited supply of farmland coming to market, and increased market demand from investors and farmers waiting for viable opportunities to purchase, has resulted in demand outstripping supply, increasing the average price of farmland. Existing agricultural businesses looking to expand and spread their costs over a larger acreage, or investors seeking the tax benefits, remains strong, but farmland is still in limited supply which means we are still seeing the average price continuing to increase.

READ MORE: Savills gearing up for 2023 rural market

“In Angus, Aucharroch Farm, Kirriemuir - an excellent 450 acre mixed arable/livestock farm with asking price offer over £2.25m, followed the market trend selling this winter in excess of the asking price."

He continued: “The demand for Scottish farms and land is strengthened by the increasing interest from English buyers looking to reinvest rollover funds or relocate to a larger farm in Scotland which is comparative in value to southern England but larger in size. This has continued to fuel demand in a market for rural and agricultural properties. Going forward, the availability of long-term finance, continuing tax status of owning land, and limited opportunities in the market, will combine to support land values. Demand for prime arable and grassland remains strong especially in prime regions with cash buyers competing for land.

“We are seeing committed sellers holding back until spring before marketing their properties – choosing to wait for some grass growth and giving time for trees to come into leaf. This always helps showcase property in its best condition and we do have a number of properties ready to come to market this spring.”

Across the dairy industry, the continual decline in herd populations due to high fixed costs has resulted in a general rise in milk prices. Even with milk price cuts up to 3ppl announced in Q4 of 2022 – taking effect in Q1 – there is still buoyant demand for dairy farms and good grassland.

D and R associate, Will Dalrymple, said: “The south west of Scotland, is home to a large number of Scotland’s dairy farms, and this area has continued to be a very active area for farm transactions. Craigalbert Farm, in Ballantre, which comprised of a farmhouse with extensive steading and over 100 acres of fertile land, went on the market for offers over £795,000 and sold well, with multiple offers in excess of asking price.”

“There is still volatility in the market for lower grades of land, particularly in the more peripheral areas of Scotland. Following a period of increased demand for land suitable for planting trees which increased land values considerably where soil and conditions are suitable, there have been changes to the Woodland Carbon Code which have meant we are now seeing hesitation from investors, and average land values for land suitable for planting seem to be falling back.”

READ MORE: Rural poverty 'overlooked' by government, researchers warn

The rural residential sector which was buoyant post Covid-19, is now faced with increasing costs of borrowing and high inflation which may restrict buyers' appetite in the residential market.

Transactional levels will be impacted during Q1 of 2023, with the cost of living crisis and rising interest rates affecting mortgage affordability - especially for first time buyers. A combination of changing markets, potential recession and significant increases to mortgages rates - which are expected to remain high over the next 6 months, has led to a decrease in the confidence of both purchasers and vendors.

With tightening restrictions across the rental market, the buy to let market is becoming unattractive for private landlords. Many are considering disposal, a rise in the number of let properties coming to the market, is anticipated.