WESTERN Australian growers looking to expand their cropping area are buying when they can and leasing when they can’t in their quest for additional country.
The willingness to lease has been evident for the past year or two, but has increased in recent months to highlight a drop in listings
CBRE Perth-based agent Phil Melville said increased inquiry about leasing properties was noticeable, and has in part been caused by landowners keen to get out of farming opting to lease instead of sell.
“Land values are setting records, and people are looking to lease country because land prices are getting so high,” Mr Melville said.
“There have been leases before, but it’s stepping up to another level because of a lack of buying opportunities.”
“I’ve got more buyers than listings.”
Appealing asset class
An altered investment landscape is adding to the appeal of agricultural land as an asset.
“Farmers are saying: Where do I put my money if I sell?
“The answer is: Keep the farm and lease it out.”
With interest rates at record lows, skyrocketing residential real estate prices, and uncertainty affecting some commercial property sectors, agents across Australia say agricultural land has never looked better as an investment class.
Mr Melville said carbon credits were also being sought.
“You’ve got different investors wanting different things; some want carbon credits and others want the social licence they bring.”
He said the market appetite for carbon credits was not taking productive land out of agriculture, but was adding value to underperforming land or remnant bushland.
Elders agent Kris Teakle also reports a strong market ahead of the useful seasonal slump in listings as growers plant their winter crop.
Among Ms Teakle’s most recent sales was the 4422ha Coalara Park at Badgingarra which sold in February to a corporate interest with plans to develop it as a sandalwood plantation.
Ms Teakle also recently sold the 1350ha Balarang at Moora to a neighbour on behalf of a family looking to realise the worth of its asset.
Under offer from an Australian interest from outside WA is the CBRE joint listing of Kalimpa Feedlot and Erim Downs farm, a 1970ha holding between Perth and Geraldton.
It is licensed to hold 6000 cattle, and comes with a permit to double capacity, as well as a 300-megalitre groundwater entitlement.
Buying offers capital growth
Geraldton-based Nutrien Harcourts agent Brad King said most growers looking for extra area were keen to buy rather than lease to ensure they could tap into capital growth.
“Most of the stuff I’ve sold is farmer to farmer, but there’s certainly some corporate activity, and there’s not much available.”
“If they can borrow the money, people are saying they’d rather buy than lease because the property might be worth 15-20pc more in years to come.”
“There are some amazing terms and rates from banks on offer for five to 10 years.”
The rule of thumb for leased country in WA’s Mid West is around 5pc per annum return on investment.
“That’s still pretty good; it’s better than what you’d get by putting the money from a sale in the bank.”
Mr King said vendors are being drawn to the market by the strong capital growth in the region’s market.
“People that thought their farm might be worth $2 million might be finding out it’s worth $3M.
“They can cash in and go and do something else.”
Efficiencies in scale
Mr King said while the average family farm might have been 2000ha some years ago, most were now 4000-8000ha, and plenty of family operations were looking for more country to get full value out of their two or more cropping plants.
Nutrien Harcourts Gnowangerup-based agent Tom Hart said he estimated WA mixed farming country prices had risen by more than 20pc in the past two years, with strong grain and livestock prices and reliable seasons lifting the bar.
“Prices are booming,” Mr Hart said.
In March, Mr Hart sold a portion of the 1912ha Rosebrook at Gnowangerup to a neighbour of the property, and the remaining portion has been withdrawn from sale.
“There’s huge demand from existing farmers wanting to expand, and not much supply.”
In December, Elders agent Craig Walker sold the 6970ha Allanooka Aggregation between Geraldton and Mingenew for a reported $7.5 million following an EOI campaign which closed November 4.
Allanooka has supported around 3600ha of rotational cropping, including wheat, lupins and canola, as well as running a flock of up to 5500 merino ewes.
Its short time on the market indicates the strength of buying interest in WA farming and mixed-farming country.
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