Farmland in Australia and NZ: Where water means value

As part of a our global farmland guide Farmers Weekly asked Matthew Sheldon of the international land team at Savills, Philip Jarvis, agent at Direct Agriculture in association with Savills, and Ian Monks of Bidwells about the farmland market in Australia and New Zealand. 

• Australia
• New Zealand

See also: International farmland – Guide to the global land market

 

Agents

Matthew Sheldon, Savills, and Philip Jarvis, Direct Agriculture

Main agricultural products

Wheat, barley, beef, dairy, wool, fruit and vegetables

See also: Farmland in Africa – From subsistence level to massive ranches

Average farmland values for good-quality arable land

£800-£1,800/acre for dryland, or £2,000-£3,600/acre for irrigated land

Average farmland values for grassland

£200-£600/ acre

Most desirable farm/ land type

Arable farmland with potential for or an existing irrigation system. This can be applied to both fixed or rotational crop farms. Water security is paramount to value

Quality of land

Australian farmland is highly variable in quality and subject to climatic volatility due to the large geographical area it spans. The farmland ranges from marginal to some of the highest quality productive farmland in the world. Due to the wide variations in productive capacity it is essential to appraise Australian farmland on a case-by-case basis 

Structure of farms

About 98% of Australian farmland is domestically owned and operated by families. These farms range from small to some of Australia’s largest single operations

For example, the largest cattle station in Australia is technically still family owned despite being incorporated. The remaining 2% of productive farmland  in Australia is in overseas ownership. The size of units is hugely varied, but the land is all classified as part of the productive asset class.

Key factors influencing land market

Political and economic stability contributes to an appealing investment and the falling Australian dollar is incentivising more international investment. Investors interested in food security  are looking to Australia in order to capitalise on the growing demand from Asia for a more westernised diet

Players in the farmland market

Smaller-scale farms tend to be bought by local farmers. Some corporate-sized individual growers are active in Australia, but there are fewer than 20 currently farming at this scale  in Australia.

Increasingly we are finding greater international interest, mostly for cattle enterprises, but demand for arable farms is growing. Most of the international interest is from Asia, but European investors are increasingly showing interest.

Limits on foreign buyers

Foreign investors require approval from the Foreign Investment Review Board (FIRB) to buy agricultural land worth more than AUS$15m (about £74m)

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Agent

Ian Monks, Bidwells

Main agricultural products

Dairy commodities, sheep and beef

Average farmland values for good quality arable land

About £6,000/acre for lowland arable and beef/sheep land

Average farmland values for grassland

About £3,100/acre for upland grazing or £9,700/acre for good dairy farms

Most desirable farm/ land type

Irrigated dairy farm or pastureland in good rainfall zone with potential for conversion to dairy. Arable land at a premium due to relative scarcity

Quality of land

Good fertile soils, extensive pasture covering most of South Island land and uplands of North Island. Arable concentrated principally on the Canterbury Plains and North Island lowlands

Structure of farms

National average farm size is 600 acres and average dairy farm is 280 acres. Share milking and share farming is common in NZ as an alternative operational model. Principal agricultural land use is meat and dairy production, predominantly extensive

Key factors influencing land market

Politically and economically stable nation with minimal political risk to foreign investments. No subsidies for agriculture meaning a market-driven industry.

Close proximity to growing Asian markets. Fonterra is largest global dairy co-operative providing market influence. Benign climate provides natural competitive advantage.

Dairy industry is main driver of land market – land values have demonstrated correlation to milk price. Land for conversion to dairy highly sought after to meet demand from Asia. Relatively liquid market (3% of holdings transacted in 2014)

Players in the farmland market

Increasing activity from foreign investors (both sovereign and institutional) interested in the dairy sector – it is thought up to 10% of land is now owned by foreign investors. NZ farming industry is unsupported so commercial farmers increasing property size is significant

Limits on foreign buyers

No restrictions on foreign ownership of land, although foreign buyers must register with the Overseas Investment Office. There is growing media attention on the level of foreign buyers. The purchase of a large station by Chinese investors has been blocked