Grass is greener in Australia for Euro agri investors
Northern hemisphere fund and private equity managers are increasingly adding Australian agricultural assets to their portfolios, an Australian commercial law firm reports.
Piper Alderman agribusiness practice group leader Simon Venus said the spring selling season for agricultural land is continuing to attract global buyers.
“If a fund manager is investing in agriculture on a global basis then Australia is a continent that cannot be ignored,” he said.
“Our foreign clients see it as part of a prudent risk management strategy to be exposed to agricultural investments in different parts of the world and that includes Australia.”
Venus believes there are some fundamentals at work that continue to make Australian rural investments attractive to overseas buyers.
These include Australia’s stable investment environment coupled with a sophisticated financial system. The low sovereign risk of Australia is also attractive for overseas investors.
“They see an underlying retention of capital value in rural land despite seasonal events, and acquisitions in Australia also represent a geographical hedge for a global operation,” he said.
“Cash flows of northern hemisphere operations are smoothed with exposure to production cycles in the south.”
European investors are faced with various difficulties investing in their homeland, especially in Eastern Europe. Venus said medieval landholding laws in Eastern Europe do not always guarantee that the purchaser will end up with the title to the property.
“Exposure to regions where corporate governance and ethics leave much to be desired also adds a whole new dimension of risk to an acquisition of rural assets,” he said.
“Australia’s land title system gives great comfort to overseas buyers. In addition, our Foreign Investment Review Board regime for acquisitions of Australian rural land does not represent the same type of barrier which foreign investment does in other countries.”
Australia’s proximity to Asia is another reason overseas investors are looking at Australia as a source of agricultural land.
“Our proximity to Asian markets is also capturing the attention of international investors,” Venus said.
“Increased incomes and growing consumer awareness are influencing eating habits in burgeoning markets such as China, where protein-driven consumption is on the rise.”
According to the United Nations, there are about 80 million new mouths to feed each year around the world.
This is combined with growing pressure to convert agricultural land for factories and housing, especially in China.
The UN estimates the demand for agricultural products by 2030 will be 60 per cent higher than today.
Australia has already attracted European fund managers, such as Radicle, which has invested in local agribusiness operations with funding raised on London financial markets.
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