How much is Scotland actually worth?
Much of the stir around land reform and agricultural holdings legislation circles around the value of farm land, who owns it and whether the distribution is fair. But what are we really talking about?
It made me think about how much money was actually involved, and how it compared with other asset classes for example property in London.
Would, I pondered, the whole of Scotland’s farmed land be worth as much as the borough of Chelsea, or would it need Kensington or Knightsbridge thrown in as well?
I put this to a man I thought might be able to answer the queries.
Let’s just call him a Strathmore farmer with a bent for figures.
Off the top of his head he thought it might only need a street in an up-market area, but promised to get back to me within a day or two.
The result was interesting indeed.
Firstly how much land is there in Scotland? There are 3.39 million acres fully rented (24% of the total), 1.97m acres of seasonal lets(14%) and 8.76m acres (62%) owner occupied.
Split that first into the oft-quoted ratio of 85% Less Favoured Area (12m acres) and 15% non-Less Favoured Area (2.12m acres) and then try to work out a value.
That may seem very difficult, but my source hit on the wheeze of using the figure discussed at the recent Perth meeting of the Agricultural Holdings Legislation Review Group (AHLRG). The suggestion was that landlords would normally look for a return of 1.5% on their capital.
Scottish Government’s own figures, released only a couple of weeks ago, put LFA rents on average at £10 per acre and non-LFA at £53 per acre.
So, assuming these figures represent a 1.5% return, the capital values would be £666 per acre for LFA and £3,533 per acre for non-LFA.
Then it is simply a case of multiplying the acres and the value making 12m acres of non-LFA worth £8 billion and 2.12m acres of non-LFA worth £7.5bn.
And there you have it: Scotland’s farm land is worth about £15.5bn, or about a third of the value of drinks giant Diageo.
It was, however, London property prices that were to be the comparison point.
“The best locations are now making anything between £2,000 and £8,000 per ft2, so I took a conservative average of £2,500 per ft2,” said my source.
“If you then take the £15.5bn value of Scottish farmland and divide it by £2,500, the answer is 6.2m ft2. Assume a house size as 1,500 ft2 and that implies around 4,000 properties.”
So there you have it: all that vastness of Scottish land could be swapped for 4,000 houses. More than a street, but less than a borough.
Who would have thought it?
Of course there are plenty of assumptions made, and anecdotally the price of non-LFA land might seem a bit cheap.
But then again the London property prices are cautiously estimated. Only last week a flat in the Number 1 Hyde Park development was reported as changing hands for a cool £141m. That would buy a few acres!
One further point on not quite the same subject.
Several attendees at the Perth AHLRG public consultation noted that as far as could be seen during the 90-minute question-and-answer session not one of the three panel members took a single note.
Considering it was billed as a “listening meeting”, that seems very strange.
There are a few possibilities.
Maybe all three Andrew Thin, Ian Mackay and Barbara Brown have remarkable memories and don’t need notes.
Maybe they had a clandestine recording device at work.
Or maybe, heaven forbid, they weren’t all that interested in the points made to them from the floor.
Not the latter, surely.