Flourishing Despite Headwinds
Western Australia's rural property market is thriving, with widespread rains in the agricultural and pastoral regions bringing prosperity to farmers and investors alike.
The wheatbelt of WA has enjoyed several good seasons in a row, coupled with historically high commodity prices strongly driving the property market. The creation of wealth and reduction of debt during these times has created a very competitive environment between farmers and corporate buyers. A tight market has more buyers than sellers and has been exacerbated by some farmers retiring to enjoy a very comfortable income (say $15M at 3 - 4% net per annum) for the “rest easy” years. Some corporate investors from within Australia have already had a good foothold in the WA rural market and are expanding, although maybe have to pay a premium to purchase better farms. The headwinds of higher input costs and interest rates have not had a significant effect on the broader farm market yet and indications are that there is an easing likely not far away.
Wheatbelt Attracts High Values with Demonstrated Productivity
In the Wheatbelt region of WA, demonstrated productivity through cropping has been attracting the highest values. A recent sale of a large farm holding near Kojonup in the South-West for $100 million was owned by a local investor who, after having a large successful building company, sold it 14 years ago and went into farming. Close attention to improving infrastructure and productivity over the period of ownership has been rewarded in a strongly rising market. However, corporate investors who do not have good on-farm management in place have not enjoyed good viability.
Corporate Investors Succeed with "Hands-On" Management and Buy-and-Lease Model
Local and overseas groups have realised that family-owned farms prosper through constant “hands on” management, which can require 24/7 attention. Running large farms with a 9am to 5pm approach will quickly go backwards. However, successful corporate operators such as Warrikirri, Lawson Grains, and Viridis Ag appear to have prospered with viability and capital growth utilising scale. Some overseas investors who purchased good farms and installed local managers have not fared as well over the past 10 - 15 years. Others have bought farms and then utilised the “buy and lease” model, which has generally proven to work very well. Local farmers know the land best and most are seeking to derive the best results by good management. The Westchester Group, a superannuation fund based in the USA, has done well over the past 13 - 14 years by recognising investing in rural Australia, especially WA, is smart investing based on productivity, capital growth and security. Westchester bought a large portfolio of farms in the higher and more reliable Western Australian rainfall districts extending from Esperance to Northampton.
Southern Agri Fiduciary’s Success
Another group of overseas investors from England known as Southern Agri Fiduciary, bought farms in the more marginal North-Eastern wheatbelt localities on a buy and lease basis. Timing is everything, but “staying the course” and working closely with the lessees is very important. In some cases, sharecropping was adopted as a good working “hands-on” model. A local experienced farm advisor was selected to oversee the farms and recommend infrastructure where necessary. The fund has enjoyed steady income and strong capital growth over the past 13 years. In 2022, a decision was made to sell the 13 farms which extend over 250km, and most have since sold with their initial investment having tripled. Acumentis Advisory WA has expertly handled the sale for the owners, and those few farms that have not sold continue to be leased until 2024, providing income whilst final sales are negotiated.
Southern Agricultural Areas Prosper with Good Yields and High Commodity Prices
The Southern Agricultural Areas of WA do not experience droughts, although low rainfall years, while rare, do occur. Modern farm cropping techniques have helped minimise risk in those years. The past 2 -3 years have seen good rainfall in the growing season, and some areas have had good summer rainfall as well. As a result, above-average yields coupled with high commodity prices have produced a level of prosperity not witnessed before. The South-Eastern Wheatbelt around Esperance has enjoyed a longer period of high yields, and the resultant money flow has seen some farmers now have the capacity to borrow $50M to $100M to buy farms either in the locality or further West. A recent sale of a farm slightly East of Jurien Bay in the Mid-West was described as a “turn-key” cropping farm. The sale showed a 375% increase in value ($6.9M) from when we valued the farm in early 2019 to the eventual sale in July 2022 ($24M). The purchaser is a large farmer from near Esperance and because expansion was more difficult in the locality because of scarcity, buying a “ready to go” farm in a 500mm rainfall closer to Perth was an easy decision.
Western Australia's rural property market continues to flourish, offering a wide range of opportunities for farmers and investors alike. Whether you're interested in intensive agriculture farms, broadacre cropping farms, grazing farms, or pastoral regions, there are ample opportunities to prosper. The Acumentis team of rural specialist valuers hold expertise across the agricultural regions in WA and across the nation. If you're interested in learning more about WA's rural property market, reach out to Brian Miles.