Farmland value rises

Farmland value rises


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Investors who took a risk and bought into Australian farmland in the past 18 months have been vindicated, with rising values across the board supported by strong commodity prices, good weather and expectations of further growth.

Investors who took a risk and bought into Australian farmland in the past 18 months have been vindicated, with risingvalues across the board supported by strong commodity prices, good weather and expectations of further growth.

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Going up: Australian grazing property indices. Graphs sourced from Herron Todd White and Australian Financial Review.

Going up: Australian grazing property indices. Graphs sourced from Herron Todd White and Australian Financial Review.

National broadacre property prices.

National broadacre property prices.

Beckworth Court, 145 kilometres from Melbourne was the first Victorian farm purchase by Macquarie's Paraway Pastoral.

Beckworth Court, 145 kilometres from Melbourne was the first Victorian farm purchase by Macquarie's Paraway Pastoral.

"In short, most regions have seen positive uplift in values over the 12 months from a few percentage points to double-digit growth," the head of Australia's largest rural valuer Herron Todd White's Tim Lane said. "The water market has also firmed further across the board."

In late 2015, before values really started to move, former Woolworths chief executive Paul Simons snapped up a sprawling sheep grazing property east of Young, NSW, for $6.5 million and said he thought the capital value for agricultural land would rise.

The number of broadacre sales in Australia is on the rise.

The number of broadacre sales in Australia is on the rise.

Now, all across NSW there is evidence of significant increases in value. For Mr Simons, who bought in at about $1970 per hectare, similar properties are now trading for $2700 per hectare. "The values are rising all the time," Mr Simons said. "I think it's because of the prices we are getting for wool and sheep meat - they have risen quite dramatically and I can't see an end to that." The price of wool reached a record high this month and the price of lambs is also trading well above previous year's levels.

In the Northern Tablelands of NSW, which has enjoyed its best season in 10 years following good winter rainfall, corporates such as Rifa Salutary, the Australian arm of China's Zhejiang Rifa Holding Group, purchased two huge prime agricultural properties south of Tamworth for about $55 million.

Macquarie Group's Paraway Pastoral purchased properties in the New England area from Sundown Pastoral Company.

Macquarie's Paraway was also an early buyer in Victoria last year, snapping up its first farm there - Beckworth Court property outside Ballarat - for more than $15 million.

There have been some standout increases in value in Victoria including in the north around Echuca, where there has been exceptional rainfall.

Herron Todd White valuer David Leeds said the conditions had "resulted in a significant shift upward in underlying land prices, particularly in the Mallee". Already this year there have been strong sales, with billionaire CQS hedge fund manager Michael Hintze acquiring his first Victorian farming property - the historic Cheviot Hills in the Western District - for more than $10 million last week. Last year he snapped up Deltroit Station in the Gundagai district of NSW for about $15 million.

However, the real action has taken place in the bigger cattle station market where drought conditions have been alleviated and the prices for cattle have risen along with the competition for productive land.

"It is not very often that you travel west from Rockhampton to find that the further west you go, the greener it gets," Herron Todd White's Michael Chaplain said.

"The winter months have put an end to what was widely considered the worst drought in the past century. The abundance of feed on the ground is extraordinary, making it difficult to imagine that only 12 months ago some of these areas were struggling to keep even the most resilient native animals alive."

He said the biggest problem faced by stakeholders in this region was finding and affording stock to take advantage of these "phenomenal circumstances".

"Values across central Queensland have continued to strengthen in recent months."

Some of the major sales during last year included the listed Rural Funds Group snapping up Lynora Downs, a 4876-hectare cotton property, for $26.5 million. BRW Rich Lister and cattle baron Peter Hughes acquired Tumbar station south of Jericho in central Queensland for about $57 million. The biggest acquisition by far was by Paraway Pastoral, which, backed by an offshore pension fund, paid more than $135 million for two cattle stations owned by the Western Grazing Company.

Colliers International's director for valuation Shaun Hendy said fundamentals were a key driver to the rising values but he is also cautious of how the values can be sustained.

"The capital gains made in the last two years have been as a result of strong prices being paid for processing cattle and restocking cattle classes," Mr Hendy said.

"The industry is well aware that the current prices are above average and sustainable levels, however, there is also belief that the new norm for cattle prices will be higher than the historical average levels, even after a downward readjustment to current prices.

“Because the industry is aware of this, the basis of the current level of investment is considered to be on a more sound footing than previous high cycles."

"There is a risk that the sheer weight of investment dollars available may drive values to unsustainable levels."

Major cattle station companies have already booked big uplifts in value including the Australian Agricultural Company whose rural portfolio gained 15.8 per cent.

Colliers director for Rural & Agribusiness Rawdon Briggs said he expected 2017 to see further gains.

"This year we will see a significant increase in the size of agribusiness transactions occurring in Australia as investors seek to gain scale and quality.”

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