PRIVATE companies are pushing up farm land prices around Longford, driven by the demand for renewable energy infrastructure and potential carbon price earnings from plantations, according to Elders Gippsland’s principle licensed agent, Greg Tuckett.
Mr Tuckett told Gippsland Farmer that on the east side of South Gippsland Highway – in the Longford, Stradbroke and Gifford area – a lot of non-agricultural players were buying farm land. Specifically, the endeavours of energy producers, like solar and wind farms, had “turbocharged the value of land specifically in that area”.
“SP AusNet is active, securing a route out of the Stradbroke area for power from solar farms proposed and wind farms proposed offshore off the coast,” he said.
Mr Tuckett said solar and wind companies were trying to buy up whole properties.
“They take options, a contact with an option, gives them a couple of years to exercise the option and acquire the land. They will buy them, but they are not tying up millions of dollars in the interim; they put a deposit down with a favourable value per acre, and have it when they need it,” he said.
AusNet had an option over a big property in Stradbroke that could become a hub to consolidate all their alternative energy sources – solar and wind – before transferring the energy via overhead lines to the Latrobe Valley.
“This is having a distinct effect on land values in that specific region,” he said.
Mr Tuckett said other non-agricultural companies were actively seeking traditional farm land. Hancock Victorian Plantations was active in the Stockdale area, driven by the state government’s $120 million fund to establish forest plantations to replace native forest.
“On top of that, they have an added incentive on top of the fund – an incentive based around carbon trading. There are three elements – government grants, the carbon trading market and the additional product, timber out the other end. They are in a great space,” he said.
“There are other players in the carbon trading business. They are motivated carbon traders to offset industry polluters. They have the same incentive regarding tree plantings, funded by government, like Hancock, that also have the carbon element,” he said.
“The end result is trees, but I don’t know if the trees they plant are commercial quality trees of not. Some of these purchasers have a focus on a carbon trading model.”
In general, however, Mr Tuckett said there was a lack of property coming on to the market. This was not due to a tightening of credit, or nervousness by the banks. “Most is a result of hesitation by vendors. After reading all the negative views about what the market is doing, they have held properties back off the market. There is a lack of stock,” he said.
Because of that, “any places that do come up, attract plenty of inquiry”. “The madness of 2021-22, the frenzy purchasing, has abated. In the interim, the value of cattle – beef cattle- has subsided as predicted. They are not half of what they were making, but in some cases only 60pc of what they were making at their peak,” he said.
Other factors were the increasing cost of funds from banks; most importantly, the nervousness of rural lenders. “They have big rural loan books. Some banks with specify a big portion of the rural lending portfolio, probably feel a little overexposed, given the looming El Nino and given the forecast for agricultural commodities, very much subdued from the last two years,” he said.
“We are finding that any contract subject to a finance clause, we mostly have to ask for an extension of time over and above that clause; we’ve got to go back to the vendor, say, the bank needs another extension to analyse further – those things are at play behind the scenes.”
In essence, the issue was a lack of volume of stock on the market. “However, for highly productive tracks of land, those properties are still selling. Remarkably, they may have even gone up a gear. Really good land, highly productive, with multiple options for usage – beef or dairy, or vegetables – has not abated value-wise,” he said.
Mr Tuckett said dry, unirrigated land – grazing country – was selling for a minimum of $5000 per acre, regardless of scale and level of structural improvements. Highly developed irrigated dairy properties were valued at $14,000-$16,000 per acre depending on the adjoining landowner pressure.
“Most small scale dairy farms when sold are being converted to beef enterprises in spite of historically high dairy product prices. South Gippsland dairy farms are currently achieving less than this on a per acre basis,” he said.
Mr Tuckett said demand by weekenders for small lifestyle farms still existed but had abated. “The real made tsunami of lifestyle buyers occurred during COVID. The pressure was unbelievable.
“Many of the places we sold brought more than the asking price. Some were bought unseen, which I think is unhealthy, but I find now that has slowed to a trickle,” he said.
Most places on a few acres offered for sale were mostly in catchment areas on the east side of Melbourne. “Again that market is quiet due to a lack of stock, a lack of phone calls.”
Mr Tuckett said rising interest rates had not yet had an impact on saleability.
“Money will cost more to borrow, but the real handbrake is lack of properties on the market. There is still pressure on genuine highly productive land, there is still neighbour pressure; they will buy whatever it costs. We refer to it as the ‘neighbour tax’!” he said.
“Those bigger more productive operators, in spite of headwinds and increased production costs, such as fertiliser – they are still intent on gaining greater economies of sale, they have not backed off at all.”
Median land prices jump, Rabobank reports – See article.