The agricultural industry is experiencing an unprecedented growth in the value of land, and experts believe this trend could continue.
The value of agricultural land has had a good run, in line with the past three years' good growth in property values. The reasons for this are varied. There is no reason to believe that this growth has reached some sort of ceiling either.
For farmers who want to sell their land, increased land prices are probably good news. But farmers looking to increase their agricultural activities have nothing to be excited about when it comes to buying or renting more land. The high prices can also obstruct the entry of emerging farmers or city dwellers into the agricultural market.
According to Mr Thabo Strydom, agriculture consultant of Seeff Agri at Bela-Bela (previously Warmbaths), the price of land without land claims, is highest. The trend in Limpopo is to convert traditionally commercial farms into game farms for tourism.
The prices of agricultural land in this province have increased by 40% over the past year. The reasons for this increase include a demand for land on which no land claims have been made or land which is unlikely to have a claim made against it.
According to Strydom, the areas surrounding Bela-Bela, Modimolle; previously Nylstroom and the southern and western areas of Mookgopong; previously Naboomspruit have experienced sharp price increases. He ascribes this to city dwellers from Pretoria, Johannesburg and the Vaal Triangle buying farms.
Land in Vaalwater, which is located further from the city, is somewhat cheaper, but the trend of increasing prices will probably hit the Vaalwater area soon.
Seeff Agri has been asked to sell various types of farms, he said. There is less interest in commercial farms, such as field cropping, however. Holdings with lots of water are very popular.
The reasons for this may be the current uncertain agricultural conditions and unrealistically low product prices. For this reason farmers struggle to recoup their basic production costs.
The prices of game farms depend on the type of game on the farm. "If any of the Big Five are present on the farm, it has a definite effect on the land price. Many people sell their game in addition to the farm."
He mentioned the example of a game farm he is selling; the farm is 3 500ha large, which has a land value of R29m. The farm is being sold, including game, for R36m. Another example was a game farm of 3 300ha which was sold for R36m. Game alone made up R11m of the price. What this meant was that game farms were selling for between R7 575/ha and R8 285/ha.
According to him, smaller farms appear to be relatively more expensive. "Few people can afford R36m, but are willing to pay R6m for 1 000 ha. Between Bela-Bela and Modimolle the price of land is between R5 500/ha and R10 000/ha. Prices for the Vaalwater area range between R4 500/ha and R5 000/ha. At Thabazimbi, land costs about R6 000/ha."
According to Strydom, irrigated land on the Krokodil River is selling for between R35 000/ha and R50 000/ha. Although most farms sold are game farms, there is still some interest in cattle farms. This could be attributed to the high price of beef, but there are also cases where cattle farms were bought and converted into game farms. There is currently a cattle farm of about 1 445 ha in the market for R5,5m; that is R3 800/ha.
Most enquiries over the past year about the availability of land came from city dwellers. Enquiries are also received from overseas, especially Belgium, Britain, the Netherlands and France.
The lower interest rate over the past three years has also contributed to increased land prices and higher demand. According to him, the recent interest rate increase isn't likely to affect interest in agricultural land.
"I doubt if further increases will have a real influence. For a week and a half following the first increase of 50 base points in June, interest declined slightly. After that, people started calling again."
According to Mr Nicholas Magada, spokesperson for Limpopo's land affairs department, land prices had increased dramatically over the past two to three years in his province. The chief reasons for the increase in land value include foreign interest in land, and the development of infrastructure.
It is generally assumed that higher land prices are farmers' attempts to obstruct land reforms, he said. Poor people or communities who want to enter the agricultural sector can't afford market prices.
In the financial years 2004/2005 and 2005/2006, the provincial department has transferred more than 11 000ha land worth more than R10m, in terms of land reform requirements. The goal for this financial year is 60 000ha. An amount of R22m has been budgeted for this.
According to Magada, the department only buys land on the open market and does not buy land which may have been made available owing to liquidations. The reason for this, he says, is that land reform is application driven. - Ainsley Moos – Landbouweekblad
Article courtesy of Landbouweekblad.
For more information on agricultural property matters, visit www.agritv.co.za.
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