Invest
Why all the fuss with agricultural investment?
When the government starts monitoring investment activity in a particular asset class, it’s time for investors to sit up and pay attention.
Why all the fuss with agricultural investment?
When the government starts monitoring investment activity in a particular asset class, it’s time for investors to sit up and pay attention.
The Deputy Prime Minister Barnaby Joyce has a sizeable bone to pick with the superannuation industry – it’s reluctance to invest in Australia’s agricultural industry.
At a time when super funds have a collective $2.1 trillion in funds under management, a paltry 0.3 per cent finds its way into rural investment. The anomaly is even starker when it’s considered offshore interests are queuing up to invest and super funds (especially self-managed super funds) are desperate for yield and reliable investment against a backdrop of ongoing share market volatility in 2016.
The reasons for this lack of investment interest have been regularly canvassed. The family-owned farming structure makes investment difficult, there is a lack of products to invest in, and the absence of knowledge about the sector and asset managers who have the expertise to advise on it.
The family-owned structure is an issue. But the other reasons cited are hard to excuse when measured against the sheer size of the industry: 12 per cent of GDP, generating revenue of $145 billion annually, and exporting, on average, more than $30 billion worth of commodities annually. Add to this the growing demand in Asia for our agri products, and the lack of investment interest is even harder to understand. It seems Barnaby might have a point. But it is not missed on foreign investors who are lining up for what is becoming the world’s biggest garage sale.
What’s rarely mentioned in the ongoing national debate is what agricultural assets have to offer. Although the value of rural land obviously fluctuates in line with market demand for agri commodities, the value of the dollar, and climatic events (think drought and flood), it attracts reasonable yields of between four and six per cent and enjoys solid capital gain.
It’s important to distinguish here between the failed tax-driven managed investment schemes of yesteryear with the genuine agricultural and animal production industries that have been integral to Australia’s economic landscape for more than 200 years.
In our opinion, domestic investment into agricultural assets has the potential to be a significant game changer in the rural sector as the replacement of debt with long-term investment equity not only provides stability to rural enterprises, but can substantially reduce the debt servicing load for the operating business.
This has many benefits, including more robust business structures by reducing debt servicing, the ability to reinvest by the operator into operating assets such as cattle, feed expansion, equipment for improvement, thus enhancing the outcome of greater revenue to increase equity or for further expansion.
And that is why the government is talking about agriculture.
Warren Gibson, general manager, sales and marketing, DomaCom
RELATED ARTICLES
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
