Leasing land is set to become increasingly common in the Australian agricultural sector, as farmers seek to expand in an environment of limited purchasing opportunities, according to a new industry report.
In its research report A New Lease on Land, Rabobank said the incentives for leasing agricultural land were becoming more compelling for both tenants and landlords alike.
Report author Rabobank analyst Wes Lefroy said leasing land provided the opportunity to “unlock scale for a growing number of farmers” in an environment where there were limited properties available for purchase.
“And at the same time, it offered farm operators the option to adopt alternative business models and ownership structures,” he said.
Kevin Hicks Real Estate owner Kevin Hicks said the inquiry for leasing had increased in the Goulburn Valley.
“Big stakeholders want to get a bigger footprint without purchasing,” he said.
“The property vendor age is fairly high and some are wanting to lease to allow themselves to semi-retire.
“Others are young farmers, who are trying to make a start.”
The report agreed, saying landowners were increasingly likely to lease out property, as agricultural land became a more attractive investment class and with leasing offering a flexible option for succession planning.
While leasing would continue to be more common among certain farm types and sizes — particularly larger farms and cropping enterprises — Mr Lefroy said it was important that all farmers considered the value of leasing land as part of their expansion strategies.
“The incentives for Australian farmers to lease a share of their operated area are already strong, with our recent research indicating 28 per cent of farmers across the country lease some proportion of their operated area,” he said.
“And of those, 11 per cent had increased the area of land they lease in 2019.
“Over the next two years, we see the motivation for both current and prospective tenants and landlords to lease to become even stronger.”
Mr Hicks said broadacre farmers were where most of the inquiry was coming from in the Goulburn Valley, but there had been a surge in small land leases for intensive crops such as vegetables.
He also said the ideal lease length was between three and five years.