Private wealth makes a play for agricultural property

High-net-worth families are increasingly competing with institutional investors for agricultural land in Australia, signalling a shift after a decade of dominance by corporate and institutional capital in the market.

Established families in Australia’s agricultural sector are taking advantage of low interest rates, strong commodity prices and equity in their existing holdings. Meanwhile, some institutional investors are being challenged by their backers in the deployment of funds due to the economic turbulence caused by COVID-19.

Land prices in Australia are at record highs. The A$35 million purchase of Nardoo Station, a 97,500 hectare cattle property in Queensland’s Gulf Country, by an Australian family for a record price is among a slew of such purchases in recent months.

Blue-chip cotton enterprise the Parkdale Aggregation, situated on the New South Wales and Queensland border, attracted over 40 expressions of interest and eight formal offers from institutional and private buyers, after 100 years of single ownership.

“Established families have amassed significant wealth over multiple generations and are now aggressively acquiring assets across numerous agricultural sectors and levels of value, undeterred by COVID-19,” says Chris Holgar, director – Agribusiness, JLL.”

The A$70 million acquisition of Tanumbirrini and Forrest Hill Stations in the Northern Territory by a private family in early 2020 also reflects the shift to private buyers.

A weak Australian dollar and other features of the economic climate are supporting the purchasing decisions of foreign investors, Holgar says.

“Alternative investments, including agriculture, look very attractive when you consider the volatility in other asset classes and low returns on risk-free assets such as government bonds.”

And this year, a break in Australia’s drought, consumer panic-buying at the height of the coronavirus pandemic, and the fact that the sector has held up during the health and economic crisis, is further boosting its appeal.

The sector’s strong investment attributes have attracted a flood of corporate and foreign institutional capital over the past 10 years, which has helped with investment in new technology and driving efficiencies.

For these investors, agricultural property is considered a hedge against core property investments, as the drivers of land value are different.

Also, the logistical challenges for overseas buyers of viewing properties during COVID-19 travel restrictions to carry out due diligence, combined with adjustments in their portfolio pricing triggered by the economic downturn, are thought to be slowing down their purchasing decisions and creating an opportunity for private families who have an ability to transact on often shorter time frames.