Australian managed farmland investments have posted strong returns for the third quarter, according to the first quarterly Australian Farmland index compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).
According to the index reading, capital growth saw a rise in annualised return of 4.96%, after six months of steady decline.
However, on an annualised returns basis, total returns amounted to 12.35% in Q3 2020, which was down slightly from 12.81% in the previous quarter; while the income return totalled 7.07%, which represented a small decline compared with 8.79% in Q2 2020.
Amélie Delaunay, director of research and professional standards at ANREV, said that the index also reflected robust investment appetite in the asset class as it has a low correlation to traditional investment markets and is supported by low interest rates.
According to Argyle Capital Partners, the risk return profile proved in the index compared very favourably to Australian equity market investments and it suggested that patient investors were well compensated for the relative illiquidity of farmland investments.
“The majority of south-eastern Australia experienced average rainfalls in the calendar year to 30 September 2020 breaking down a prolonged drought since 2017,” the manager said.
“However, farming regions in Western Australia and southern Queensland continue to suffer from sustained rainfall deficiencies. In general, winter cereal crops and livestock pastures benefitted tremendously from timely rainfall in 2020 to date which will translate to greater income generation over the coming months as those annual crops are harvested.”
Also, according to Argyle, the Australian agricultural sector was impacted by arbitrary, punitive tariffs and other trade bans imposed by China on Australian export trade despite a bilateral free-trade agreement in place since 2015.
“In the short-term we anticipate the China trade imbroglio will impact farm-gate commodity prices in some sectors and may marginally dampen farmland enterprise revenues in the year ahead. However, we do not expect any long-term impacts or negative sentiment towards Australian farmland investments.”
The new index would aim to provide quality information to professional investors on institutional grade agriculture assets, allowing them to fully assess the sector from both an income and capital return basis compared with other investment classes.
It would also aim to raise the importance of agriculture as an investable asset class and deliver essential transparency to institutional investors on Australian farmland performance.
The ANREV Australia Farmland index tracked the income and capital appreciation performance of 42 different farmland properties managed by some of Australia’s major agricultural asset managers with a market value over $1.19 billion, of which 72% by value were permanent horticultural crops and 28% were annual farmland assets.
