Foreign investors get the jitters
Cashed-up overseas investors are baulking at buying Australian farm land amid fears the Government will crackdown on foreign investment.
Last month it was revealed the coalition and the Greens would launch an inquiry into how the "national interest test" is applied to sales of farmland to foreign investors.
The inquiry, set to report by November 30, has the support of both Federal Agriculture Minister Joe Ludwig and Assistant Treasurer Bill Shorten and comes on the back of an announcement last year that the Government would be looking into exactly how much of Australian farmland and how many agribusinesses had overseas owners.
Currently, Australia rural property and food company purchases and food of under $231 million by international investors do not need Foreign Investment Review Board approval, but in what is fast becoming an emotive issue nationwide, things could be set to change.
The Greens and independent Senator Nick Xenophon have introduced a Private Members Bill that would require any international investment in Australian land greater than $5 million be subject to screening by the Foreign Investment Review Board.
But while the findings of the inquiry aren't expected for another couple months and the Bill is yet to be discussed, foreign investors are already getting cold feet when it comes to Australian land.
Corporate Agriculture Australia managing director Gordon Verrall said informed international investors were concerned about the Bill.
"That has caused some concern and probably completely stopped some small projects in their tracks until that's a bit more certain," he said.
"They are becoming a bit more cautious.
"They understand there is a potential obstacle in the way and they need that obstacle to be clarified."
Mr Verrall said he had had discussions with a western European, Hong Kong-based financing group which had hoped to enter the WA market.
But should the Bill pass, he was uncertain whether the proposal would go ahead.
"These particular investors, for want of a better word, are simply looking to finance current growers," he said.
"As you appreciate most of our banks will lend to 50, maybe 60 per cent of land value and some of these guys will lend far higher than that - at 80 to 90 per cent of land value - which is a far more accepted practice in most other regions in the world.
"It will probably fill a niche for growers who currently can't get financed but want to stay farming."
Despite the investors not directly seeking to own farmland, the Senate Bill still threatened the viability of the venture.
"The fall back of any financing product is repossession of land if the finance facility goes wrong," Mr Verrall said.
"They've got a model developed and if they can be assured that in a default basis they could hold that land on an interim basis at least until he could sell it, then the model would progress.
"Under this proposed model if they weren't able to own that land it would be a very awkward situation."
Mr Verrall expects other foreign investors are likely to simply spend their cash elsewhere.
"Most of them will probably walk, for the very simple reason that a $5 million limit is really only one farm," he said.
"Most corporate investors invest significant sums to money to obtain scale in whatever investment they invest in and one farm doesn't mean scale.
"I think it would be a very detrimental outcome for Australian agriculture."
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