ANREV: Capital growth in Australian farmland rises for first time since March 2019

The latest figures from the Australian Farmland Index showed good returns for investors in 2020, only falling slightly from the same period one year earlier.

Returns for Australian farmland have remained strong in 2020, with capital growth in land values recovering slightly in Q3 2020 on an annualized basis, according to the latest edition of the Australian Farmland Index.

Returns on an annualized basis for Q3 2020 stood at 12.35 percent, slightly down on the same figure for Q2 2020 of 12.81 percent and down from Q3 2019’s 14.37 percent.

The Q3 2020 annualized return was comprised of an income return of 7.07 percent, slightly down from 8.79 percent in Q2, and capital growth of 4.96 percent. The latter figure grew from 3.73 percent in Q2 2020, halting a fall in capital growth that has been seen in every quarter since March 2019, when the figure stood at a high of 10.19 percent.

The quarterly return for Q3 2020 stood at 2.04 percent, comprising 0.48 percent income returns and 1.56 percent capital appreciation.

The latest edition of the Australian Farmland Index is the first to be compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles. The index was previously compiled and managed by the National Council of Real Estate Investment Fiduciaries.

The index tracks the performance of 42 different farmland properties managed by Argyle Capital Partners, Aware Super, goFARM Australia, Gunn Agri Partners, Hancock Agricultural Investment Group, Laguna Bay and Rural Funds Management.

The properties have a total market value of more than A$1.1 billion ($833 million; €683 million), of which 72 percent by value are permanent horticultural crops and 28 percent are annual farmland assets.

Amélie Delaunay, director of research and professional standards at ANREV, said in a statement: “We are delighted to publish our first Australian Farmland Index. The index will provide quality information to professional investors on institutional grade agriculture assets, allowing them to fully asset the sector from both an income and capital return basis compared with other investment classes.

“The index will raise the importance of agriculture as an investable asset class and deliver essential transparency to institutional investors on Australian farmland performance,” she said.

“Over the past year, investments in Australian farmland have performed strongly, reflecting robust investment appetite in the asset class – which has a low correlation to traditional investment markets and is supported by low interest rates.”

Since inception in December 2015, the index has shown a total annualized return of 13.70 percent, comprised of 6.30 percent income returns and 7.09 percent capital growth.