Farm­land val­ues soar

The Free Press (Corowa) - - FRONT PAGE -

The value of farm­land has more than dou­bled over the last two decades and the larger farm­ers are be­com­ing big­ger.

Based on Ru­ral Bank’s third an­nual Aus­tralian Farm­land Val­ues Re­port north­ern Vic­to­ria val­ues have soared from under $2,000 per hectare in 1997 to well over $5,000 per hectare in 2017.

South­ern NSW farm­land has soured from around $1,000 per hectare al­most $4,000 per hectare in the same pe­riod.

North­ern Vic­to­ria recorded an av­er­age an­nual me­dian price growth of 7 per cent over the five year pe­riod. In South­ern NSW, the fig­ure was 6.9 per cent.

El­ders Yar­ra­wonga Real Es­tate man­ager Rod Les­lie said the prices in the Yar­ra­wonga area have re­cently been at the higher end of $5,000 per hectare and north of Mul­wala closer to $5,000 per hectare.

Mr Les­lie said the farm­land prices were re­flec­tive of de­mand in the area con­sis­tent with other ar­eas in the re­gion.

“In my ex­pe­ri­ence the ma­jor­ity of sales were lo­cal farm­ers look­ing to in­crease their hold­ings but out­side in­ter­est is also strong,” he said.

“Much of the in­ter­est is around lo­cal farm­ers need­ing the land to jus­tify their larger ma­chin­ery and they are happy to se­cure a premium price.

“North East Vic­to­ria farm­land is highly re­garded due to the area’s con­sis­tent cli­mate and re­turns,” Mr Les­lie said.

Vic­to­rian Farm­ers Fed­er­a­tion Grains Pres­i­dent Ross Johns de­scribed the jump in the me­dian prices across the re­gion as “out­stand­ing” and be­lieved it was largely driven by farm­ers with size­able land­hold­ings and cor­po­rate en­ti­ties want­ing to con­sol­i­date.

“I think th­ese land val­ues are also a re­flec­tion of the ex­tremely low in­ter­est rates we have. The cost of cap­i­tal is so low at the mo­ment and if that changes we’ll see an im­pact on as­set val­ues,” he said.

The surge in land val­ues means farm­ers now have ac­cess to greater eq­uity, but it is also likely to cre­ate a few rate-hike headaches.

Coun­cils are revalu­ing prop­er­ties close to those re­cently sold for record prices, push­ing up their cap­i­tal im­proved val­ues and rates.

In Fed­er­a­tion Coun­cil’s 2017/18 bud­get ru­ral rates rose sharply, pri­mar­ily based on land val­u­a­tions which showed up to 23% in­crease in farm land val­ues. Coun­cil lim­ited the rate in­crease to 14.9%.

Un­usu­ally, ru­ral rates (mainly the for­mer Corowa Shire) in the Fed­er­a­tion Coun­cil area in­creased well above the level of res­i­den­tial rates with many were in the or­der of 7% and 1.5% for the for­mer Corowa and Urana Shires re­spec­tively, fol­low­ing coun­cil’s full anal­y­sis of val­u­a­tion and ap­pli­ca­tion of rate in­creases.

Coun­cil re­ceived many sub­mis­sions from farm­ers, par­tic­u­larly from farm­ers in the south­ern end of the coun­cil area, con­cerned about the sig­nif­i­cant in­crease in rates.

At that time, Fed­er­a­tion Coun­cil Ad­min­is­tra­tor Mike Eden said: “But tak­ing into ac­count land val­ues that went up over 20 per cent and by as much as 28 per cent, the rate in­creases are rea­son­able. Farm­ers are able to claim a tax de­duc­tion when run­ning a busi­ness.”

As a re­sult, Fed­er­a­tion Coun­cil made a con­scious de­ci­sion to en­sure sub­stan­tial fi­nan­cial com­mit­ment to ru­ral roads as ev­i­dence of the im­por­tance of the ru­ral sec­tor, with in­creased em­pha­sis on roads used by farm­ers to get their crops to si­los.

Ru­ral Bank man­ag­ing di­rec­tor and chief ex­ec­u­tive Alexan­dra Gart­mann said the 2017 re­port re­in­forced the im­por­tance of tak­ing a long-term view.

“Volatile cli­mate and mar­ket con­di­tions char­ac­terise farm­ing across the coun­try and as a re­sult, it is in­evitable th­ese, along­side many other fac­tors, will con­trib­ute to fluc­tu­a­tions in farm­land val­ues,” she said.

Ru­ral val­u­a­tion spe­cial­ist and agri­cul­tural economist Sam Pa­ton of Agribusi­ness Val­u­a­tions Aus­tralia said while the news was good for those want­ing to sell, the mar­ket could be­come over­heated with land prices not re­ally jus­ti­fied by en­ter­prise re­turns.

He said re­turns on the money in­vested in land and stock were barely 2 per cent in dairy­ing, beef and crop­ping in south-west Vic­to­ria, for ex­am­ple, while 10 years ago ex­pec­ta­tions would have been a 10 per cent re­turn on cap­i­tal.

He warned the strong rise in land val­ues was at odds with the low rate of re­turns.

Mr Pa­ton said the high land prices were frus­trat­ing for those wish­ing to ex­pand their hold­ings and new farm­ers want­ing a start.

“Ideally we should have a nice bal­ance be­tween nom­i­nal cap­i­tal gain and the abil­ity of fam­ily farm­ers, who I be­lieve are the back­bone of Aus­tralian agri­cul­ture, to be able to ex­pand at re­al­is­tic prices,” he said.

The Ru­ral Bank anal­y­sis is based on the sale of 8480 ru­ral prop­er­ties na­tion­ally in 2017, in­clud­ing 1827 ru­ral sales in Vic­to­ria, 3690 in NSW, 241 in Tas­ma­nia, 325 in SA, 1720 in Queens­land and 677 in WA.

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