Land the perfect investment for foreigners

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Stock & Land | 26 January 2012
Philip Jarvis, Philip Jarvis & Associates

by MATTHEW CAWOOD

SICK of seeing paper wealth evaporate, investors are looking for "tangible assets with strong underlying fundamentals" - and that describes Australian farmland, land agent Philip Jarvis says.

From his office in Armidale, NSW, Mr Jarvis specialises in discreetly matching wealthy overseas investors - mostly from his native United Kingdom - with local farmland investments, usually without going through the open market.

Overseas business at Philip Jarvis & Associates has been quiet for a few months as the European situation shakes out, Mr Jarvis said, but enquiry is picking up as investors look for a safe haven from the firestorm of wealth destruction occurring around paper instruments.

"Agriculture and farmland are now recognised as a new investment asset class that is not correlated to mainstream asset classes," Mr Jarvis said.

"Globally, the availability of farmland is in decline. This is classic 'investment in scarcity'."

Compared with other developed nations, Mr Jarvis said, Australian farmland is usually modestly priced. And with the rise of huge new middle classes in China and India, it is strategically positioned near the world's major growth markets for food.

"We are in close proximity to over three billion aspirational people with increasingly westernised, protein based diets."

Australia's attractiveness is reinforced by its institutions: a stable transparent government and well-regulated legal and financial systems.

While interest in Australian agricultural land is coming from all quarters, it is the prospect of sovereign investment to shore up a nation's food security that is attracting the most attention.

China "has had a very good look" at investment in Australian farmland, Mr Jarvis said, but so far has opted to instead buy up land in African countries less politically sensitive to foreign acquisition.

"I'm sure the Chinese will make a move in Australia at some stage. You have 21 per cent of the world's population living on six per cent of the world's arable farmland."

Meanwhile, the Gulf States, notably Qatar and its government-owned food arm Hassad, have not been so reticent.

Qatar now owns about 750,000 ha of Australian agricultural land. With Hassad reportedly only halfway through spending the $400 million it plans to invest here, the tiny Arab nation could eventually own more of Australia than there is of its 11,400 square kilometre homeland.

Hassad Australia's chief executive Tom McKeon told a 2011 Senate enquiry into foreign ownership that Qatar is investing in land partly to establish its own food security, partly to develop an alternative commodity revenue against the day its oil runs out.

With the right oversight, Mr Jarvis argues that such investment in Australian farmland should be welcomed and capitalised on.

Foreign investment in land brings with it new capital into agricultural economies that are otherwise dependent on farmers reinvesting in their own operations, he said. Overseas capital should be welcomed by communities in which local reinvestment can be stalled by climatic or market downturns.

And, Mr Jarvis points out, unlike foreign investments in Australian agribusiness, which allows assets to be stripped and businesses to be moved offshore, land can't be moved.

However, he suggests that there needs to be "a conversation" about sovereign investment by countries versus private investment in land.

Because the Foreign Investment Review Board (FIRB) only records approvals, but not acquisitions, there is no ready means of calculating how much foreign investment in local land has been made by sovereign interests.

All sovereign investment is scrutinised by FIRB, with the ultimate sign-off on whether the investment is in the national interest residing with the Treasurer.

"I think understanding the level of sovereign ownership - who is here, and how much they own - is well worth pursuing," Mr Jarvis said.

"The structure for screening investment in the national interest is in place - so long as it is correctly interpreted by our elected officials."
Original source: Stock & Land
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