Rural property values to hold firm in pandemic year
Driven by global food demand, favourable growing conditions and a low Australian dollar, rural property values are expected to hold firm in 2020 despite the threat COVID-19 poses to global supply chains.
“The outlook for the Australia agribusiness sector is positive and supported by a growing worldwide population, the more affordable nature of Australian land values compared to other countries and the increasing worldwide demand for Australian food production,” said Karina Salas, associate research director at Colliers International and one of the authors of its 2020 Agribusiness Research and Forecast Report.
Following a record year of transactions in 2019, when deal volumes rose 30 per cent to $4.3 billion, Ms Salas said the forecast for 2020 was for “general value stability with perhaps some firming of rural land values in late 2020 after winter crop harvest is completed”.
Underpinning asset values, she said, was increasing demand for Australian agricultural products, good rainfall across significant areas of the country this year and generally strong commodity prices.
Properties producing beef, citrus, grains, lamb, wool and macadamia nuts have the strongest asset demand outlooks for 2020, according to the real estate firm.
Despite the positive outlook for most sectors, the report warns that risks are heightened this year due to the threat COVID-19 poses to staff working in processing facilities and to global food supply chains.
The latter is of particular concern given that more than three-quarters of Australia’s annual agricultural production by value (78 per cent or $62.2 billion) is exported, according to the Department of Agriculture (ABARES).
Other headwinds include the greater direct competition sectors such as cotton face from US export activity to China as part of phase one of the US-China trade deal signed in January.
There is also the potential for a drop in demand for some discretionary, high-value agriculture products, as was seen with the southern rock lobster sector, where trade activity with China ground to a halt.
In terms of buyer demand, market conditions in 2020 are expected to favour “sophisticated domestic high-net-worth investors”. In prior years global institutional capital has poured into Australian farmland, including from Canadian and American pension funds.
“The outlook of the Agribusiness investment market in 2020 is steady and largely driven by the consistent increase in demand for quality agricultural product,” said Rawdon Briggs, head of agribusiness at Colliers International.