A significant rethink of the drivers of farmland values is currently underway in Western Australia.
It is centred mainly on the Wheatbelt region, which is typically North and East of the Perth Metro region and extends out in an arc approximately 350kms from Perth.
Traditionally, the farm values in these locations had changed based on improved farming returns, as a result of improvements in machinery, technology, crop varieties all with a backdrop of declining rainfall in most locations.
But scroll on to 2025 and we can see that farm values are no longer just based on farming returns but are now being influenced heavily by the following four forces.
Mandatory Climate Reporting
Mandatory Climate Reporting was passed in Federal Parliament in September 2024.
The mandatory climate reporting requirements will be phased in over the next three years across three groups of reporting entities, with the first reporting cohort required to prepare annual sustainability reports for the financial year commencing on or after 1 January 2025. The second and third reporting cohorts are required to prepare annual sustainability reports for the financial years commencing on or after 1 July 2026 and 1 July 2027 respectively. (ASIC MEDIA RELEASE SEPT 2024). The bottom thresholds (Group 3), being 2 of: 1. Consolidated revenue of $50 million or more; 2. EOFY consolidated gross assets of $25 million or more; and 3. EOFY employees of 100 or more will capture many organisations. In short, a business in one of the 3 groups will report on their climate footprint and ultimately in time, what will be done to decarbonise or offset emissions. The most obvious way to mitigate this risk is with Carbon Sequestration. Environmental Plantings are an increasingly common form of sequestration, using farmland to plant out to trees. It is no secret in the Wheatbelt that large emitters, like Woodside, Mitsui, Rio Tinto, BHP, and others have already purchased or made arrangements with farmland owners to purchase or lease large tracts of traditionally cropping land. This is pushing prices up. The value being paid for farmland by the emitters is essentially a cash flow model, based around the Australian Carbon Credit Unit (ACCU) and the Full Carbon Accounting Model (FullCAM).
Renewable Energy
In 2022 the then Premier of WA, Mark McGowan announced that all WA coal power stations will be retired. Starting with Collie in late 2027 and Muja in late 2029. The State Government has made a huge financial commitment towards renewable energy sources. At present, the bulk of that uptake is on farmland with a combination of Solar and Wind. The projects are significant but require access to the South West Integrated System (SWIS). This is a large power grid that projects are required to hook into. Proximity to these lines is integral and Renewable Companies are paying a premium for farmland that has proximity to these lines. Valuers are required to have a keen understanding of the locations of these lines. Likewise, if properties don’t have proximity, then different values apply.
Development Offsets and Mining
The mining/gas sector has been an active buyer of farmland in the Wheatbelt for new mines such as “Narembeen”, “Bencubbin”, “Southern Cross” and “Julimar”, and on-shore gas projects from Dongara to Mingenew. While traditionally, most mines are situated on pastoral leasehold land, there have been some small scale gold mines on freehold land that have proceeded. In these cases, the freehold owner is compelled to agree to the project, which is usually a negotiated outcome. Premiums of between 1.5 – 4.0 times farmland values have been paid to allow access to the resource.
Road transportation from the East Coast into Western Australia
Currently, road trains headed to Perth are required to break up at the Road Train Assembly Area in Northam and deliver “dog run” loads to their final destination in the city, before returning to collect the next load and delivering that, then returning east. “This activity, combined with mandatory rest breaks, essentially delay the drivers and linehaul equipment for up to three days at Northam. “These large vehicles are making up to three return trips per truck on domestic roadways, adding levels of risk, poor efficiency, high carbon impacts and slower speed to market. The Wheatbelt Development Commission has obtained grants to lubricate the substantial change in transport routes required in the Wheatbelt. CBH is already underway on expanding its main grain receival networks around road and rail. Farmland is being acquired and used to expand and realign road networks” (Avon West Brochure). Once again, if your farmland is close to these logistic nodes your farming operation will benefit and so will values.
Valuers are required to be acutely aware of the above factors when assessing farmland values and analysing sales evidence. A good valuer can provide guidance in an area that has become so much more complicated in the last 5 years.
Source 1 | Source 2 | Source 3 | Source 4