Author Topic: Australia sells off the farms to foreign interests  (Read 1773 times)

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Australia sells off the farms to foreign interests
« Reply #1 on: April 23, 2012, 04:34:02 PM »
OFFSHORE investors have underpinned the rural property market in the past year, but a lack of information means little is known about the extent of foreign ownership in Australia.

In January, the federal government released the Australian Bureau of Agricultural and Resource Economics and Sciences report into foreign investment, which followed a survey of foreign ownership levels last year by the Australian Bureau of Statistics.

The report reveals present levels of overseas ownership are on par with levels reported at the last significant government analysis, conducted in 1983-84. The findings show about 44 million hectares, or 11.3 per cent of Australian agricultural land, is wholly or partly foreign owned. Foreign investment expenditure totalled $139.5 billion in 2009-10, with 58 per cent of investments for mineral exploration and development and 1.6 per cent ($2.3bn) for agriculture.

According to the report, foreign owners of agricultural land fall into three main categories: private or government owned companies seeking to expand into other countries to extend activities up the supply chain; entities seeking to benefit from owning and operating farmland, but where these operations do not form part of any larger agricultural or food businesses; and purchases by mining companies.

The rural director of property valuation group Herron Todd White, Tim Lane, says the main sources of inquiry into the rural property market are institutional investors from the US and corporate, institutional and private investors from Asia - particularly China and Korea - as well as from Britain and northern Europe.

Recent investments by offshore groups include: the purchase of a 125,000ha cattle station, Moray Downs, in central Queensland by Indian mining and energy company Adani in a deal reportedly worth $110 million; the sale of Sterling Buntine's Tanumbirini station in the Northern Territory for about $33m to British equity investment group Thames Pastoral Company; and the sale of the 4000ha property Kealandi, near Moree in northern NSW, for $15.9m and a large-scale aggregation worth more than $20m at Jerramungup, near Esperance in Western Australia, by Macquarie Group's new land investment fund, Lawson Grain, which is made up of international private investors.

Sovereign investment by Qatar-based Hassad Foods continues, with the operation now running more than 170,000ha of farm land in NSW and Victoria. Hassad plans to spend another $200m to continue aggregating farmland in a bid to shore up Qatar's future food security.

"I think foreign investment has had an overall positive impact on our agricultural and rural property sector, but what we need to establish is the facts: how much, where and to what value," Australian Farm Institute executive director Mick Keogh says.

"Despite reports conducted recently by the government, there is a distinct lack of detailed information available on the extent of foreign investment, including how much of the country's prime and highly productive agricultural land is foreign owned, for what purposes is it being used and how ownership has been determined, for example, when the land owner is a company, comprising both overseas and Australian shareholders?

"We cannot have a proper debate or create appropriate policy without that information."

Keogh believes Australia should take a lead from countries such as New Zealand and the US, which have put measures in place to obtain detailed and transparent information on foreign investment.

New Zealand has a substantial register on how many foreign investment transactions are occurring, to what value and scale, yet it doesn't appear to discourage investment either, which is important.

Malcolm Tyson, managing director of rural and agribusiness at Colliers International, also believes foreign investment has had a number of positive affects, including injecting capital into properties to improve land and productivity as well as providing ongoing employment opportunities for the local agricultural workforce.

"The vast majority of offshore investors want to appoint Australian managers to make strategic decisions for their properties," Tyson says.

"They value local knowledge and there are going to be an increasingly large amount of opportunities for agricultural professionals to gain a career with some of the international groups.

"But the concern for us is, where are these agricultural professionals going to come from?" Tyson points to the alarmingly low number of university enrolments in agriculture, which have dropped to record lows this year with just 700 agricultural scientists expected to graduate nationally in 2012.

Chris Meares, of rural real estate company Meares and Associates, believes one way to level the playing field for Australian investors would be long-term, low-interest funding solutions rather than reducing the potential of offshore investors, "which could lead to a sharp reduction in land values".

"Australian investors are disadvantaged by a lack of available funding compared with offshore competitors," Meares says.

"The Australian banking system is geared for short and medium-term lending at commercial rates of interest, which can make it hard for Australian investors to compete with the likes of some offshore sovereign investors that can access 30-year, interest-free loans in a non-market currency."

The old adage that you can't make more land will always appeal to investors regarding hard assets, as opposed to soft assets such as money markets, but financial institutions must be prepared to take a long-term view in Australia, as other countries are doing, Meares says.

Despite the challenges, public and private Australian investors are beginning to claw their way back into the market on the back of good seasonal conditions and more favourable commodity prices, particularly in the livestock sector.

Increases in neighbour-to-neighbour transactions, driven by confidence to expand, have been witnessed this year.

But only a handful of large-scale transactions have occurred due to the lack of supply of top-end properties, compounded with an international market that is pausing to see what eventuates in Europe and in the main commodity markets, Lane says.

"Over the last year we have seen a lot of corporate farms from the likes of Four Arrows, Clyde Agriculture and the Twynam Group sold but they are all now largely gone," he says.

"Investors are looking at aggregating farms but it isn't as easy or as attractive."

Lane says a two-speed market has also developed in the rural property sector, "whereby the top-end properties with economies of scale and well-set-up infrastructure are doing very well, and the mid to bottom end of the market - particularly lifestyle properties - is very slow".

While some premiums have been achieved, particularly in the livestock sector, values on most rural property sales towards the end of last year and so far this year have been as much as 10-20 per cent down, with some sectors, particularly wine and viticulture, experiencing a drop of 20-25 per cent from peak periods just a few years ago.

But Lane says more vendors are coming to realise that the market today is the market today, and a drop in values has been required in order to meet the market.