National rural and agribusiness research report
June 28, 2012
Transactional activity for large scale dry and irrigated farming country and large high rainfall grazing holdings has begun to improve as offshore interest buoys local competition, according to a report released today by Colliers International.
“The key wording here is large scale,” says Alex Thamm, National Director of Rural & Agribusiness
Valuation & Advisory at Colliers International.
“The traditional neighbour to neighbour market for smaller holdings is still subdued,” he said.
“This sector typically forms the backbone or floor in the market and many of these buyers are still cautious, being reluctant to act or being constrained by bank required equity positions.”
Mr Thamm sees rural property markets in general being more likely to track sideways for the next three to five years.
He did note that there may be specific sub-markets that may rebound more quickly where they are coming off a very low base, such as vineyards.
“Return on investment remains a key priority and it is our view that the market will need to see a general uplift across most agricultural commodities before there will be an economic justification for land prices in general to rise in value.
Tim Altschwager, Director of Rural & Agribusiness at Colliers International said prices in most sectors of the rural property market appear to have bottomed out and transactional activity is increasing.
“During the last three years there has been significant restructuring within the rural property sector, particularly forestry and the wine/vineyard sector.”
“Since mid-2011 this has created opportunities and encouraged activity,” he said.
“We know that capital is being raised globally and new rural and agribusiness funds are being established.”
According to the report, more than $2 billion in equity commitments has been raised and another circa $2.5 billion is in the process of being raised for investment in agricultural land.
Mr Altschwager said there is a new breed of investor coming through.
“It’s not just offshore investors but high net worth individuals are also in this space and it’s no longer just tax driven.”
Mr Altschwager said it is about food security, portfolio diversification and capital growth.
“Large scale Australian agricultural property ticks these boxes,” he said.
“We expect more large scale transactions will occur as investors seek to increase their exposure to Australian agricultural assets with potential.”
Mr Thamm said the level of foreign ownership of agricultural land and food production in Australia continues to concern many in the community.
“While foreign investment plays a significant role in agribusiness, so do local interests.”
Mr Thamm says a long history of foreign investment in Australian rural property has resulted in the development of large areas of farming and grazing land.
“It is probable, particularly in the case of non-viable MIS forestry land, that foreign capital will be involved in reverting this land back into alternative production.
“History suggests that we have little to fear from foreign investment.”
“What is not so clear, says Mr Thamm, and is certainly more contentious, is the possible loss of prime productive land to mining interests.”
Back to listing