Skyrocketing commodity prices and cheap debt are fueling a farm-buying frenzy
The median price of Australian farmland rose by more than 20% last year, with an area changing hands just under half the size of Victoria, according to the Rural Bank.
- The median Australian farmland price rose to $7087/ha in 2021
- The farmland market is growing much faster than the ASX or the residential real estate market
- The area of agricultural land that went under the hammer was larger than that of many countries, including Portugal, Austria and Ireland.
In its annual report on farmland values, specialist lender Rural Bank said demand for farmland was fueled by historically low interest rates, soaring commodity prices and strong production.
The median price per hectare (ha) increased by more than 30% in Victoria ($10,583/ha), Queensland ($6,827/ha) and Western Australia ($4,178/ha).
Nationally, it is $7,087/ha.
Farmland value growth over the past 20 years has risen to 8.4%, outpacing the ASX200’s 4% growth over the same period, and the residential market’s 5.4% rise of the capital over the past 18 years, according to the Rural Bank. .
“Generally we’ve had a very favorable season for agriculture in 2021,” said Simon Dundon, Rural Bank’s managing director of sales, partnerships and marketing.
Senior director of commercial property company LAWD, Danny Thomas, told a recent NSW Farm Writers event that the market “is absolutely hot”.
“There are very few segments of the market that aren’t performing extremely well, and the depth of buying is unprecedented,” Thomas said.
The Rural Bank forecast that demand for farmland would remain strong through 2022, but noted that rising interest rates could dampen the scale of demand.
“Finance is an input, and it will definitely play in people’s minds,” Dundon said.
“But the caveat I would put to that is that interest rates are still at historic lows and farmers are generally long-term investors.”
The Weekly Times has revealed Australia’s richest woman, Gina Rinehart, is no longer Australia’s biggest landowner, with Crown Point Pastoral Company’s Viv Oldfield and Danny Costello topping the list.
Crown Point Pastoral now owns a total of 7.2million hectares of land in northern Australia, having bought four resorts from Ms Rinehart’s Hancock Prospecting and S Kidman & Co portfolio for $3.1million , James Wagstaff, editor of the Weekly Times, told RN’s Country Breakfast.
A spending spree by Canadian pension fund PSP Investments has resulted in a $5 billion portfolio of assets and places the fund as the largest farmland owner by value.
In 2020, the ABC revealed that PSP, which manages the pensions of the Royal Canadian Mounted Police and its civil service and armed forces, was the largest owner of water rights in the Murray Darling Basin.
Through its subsidiaries, Daybreak Cropping, Australian Food and Fibre, Aurora Dairies among others, it acquired AusCott in May last year, including AusCott’s 40,000 hectares of cotton land and gins in northern New South Wales and the Riverina.
Earlier this year, PSP Investments acquired 1.1 million hectares of land in the Northern Territories for $96 million.
Growing family farms
At the same time, large corporations have expanded their holdings, across the country some of the highest prices paid for farmland have been paid by family farms seeking to acquire neighboring or local plots of land that have been put on the market.
“Some landowners have sold land, and it’s been really refreshing to see family farmers expanding and buying those properties,” Mr Dundon said.
Such was the case in 2020, in southern New South Wales, when the Westchester Group, a US fund, listed an aggregation of large properties that were bought up in smaller plots by neighboring family farms.
Oxley Capital Partners managing director Ben Craw said investments made 7 to 10 years ago by fund managers were coming to an end.
“There has been anecdotal evidence in the market of a number of closed-end funds reaching the end of their time horizon,” he said.
The latest data from the Foreign Investment Review Board revealed a slowdown in foreign purchases of Australian farmland.
But Mr Craw said the ability of big companies to sell land to local buyers made Australia an attractive investment.
“It’s positive, and the groups we talk to, domestic investors and offshore capital, view Australia very favorably.
“So there’s a lot of appetite and a lot of money that still has Australia in its sights.”
Mr Dundon expects the market to remain “buoyant” in 2022.
Mr Craw said the good seasons were unfolding and the cash flowing through the regions extended beyond the farm.
“There’s a lot of prosperity when you go to the regions,” Craw said.
“You talk about the social fabric of regional Australia, you can really feel the prosperity, which will inspire more young people to get into farming.”
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