01 Oct 2012
The worldwide economic recession has had a severe impact on farm sales countrywide, and the Eastern Cape’s farm sector has suffered accordingly.
However, according to John White, Pam Golding Properties’ farm agent in Grahamstown in the Eastern Cape, this year has seen a significant increase in interest in farms, as compared to the previous two years, where interest in this sector was lacklustre.
The difference is that prospective buyers are now far more knowledgeable than in the past, and are not prepared to pay unrealistic prices.
Although it is a buyer’s market at the moment, sellers have yet to adjust their prices to meet the current market conditions, he says, and as a result, properties are not moving as they should.
"This means that the financial resources of the sellers are still robust, and are not under pressure to sell.”
If the rand/dollar exchange rate weakens significantly, this could entice the overseas buyer back into the market, explains White.
However, with South Africa in the global media spotlight of late for the wrong reasons, and pending legislation (Green Paper on Land Reform), White says he doesn’t anticipate the interest will be as significant as in the past.
He says the profile of the farm buyer has changed radically. The main area of interest is among black buyers, mostly via the Department of Land Affairs and middle class urban dwellers looking for a place in the country. The demand range for this group is mainly between R2 million and R5 million.
White says they are looking for the largest piece of ground they can find within their budget, but find the properties too expensive, as the gap between buyer and seller is still too great.
“Interest from black buyers has increased significantly this year, with most sourcing farms themselves. The Department then processes these applications. However, this process can take up to a year, or even longer.”
Commenting on the market in general, White says the demand for large farms is very limited, as it appears that buyers are not yet prepared to risk the sizeable capital outlay. The financial position of stock farmers at present is positive, he says.
But with the limited number of good quality, developed stock farms on the market, buyers looking to acquire game farms for conversion to stock farms are not willing to pay the prices that game farmers seek. The cost of redeveloping these farms is prohibitive and it seems that sellers of game farms are not in the market aggressively as yet.
White says they are also seeing quite a strong demand for farms from people wanting to relocate from other areas, where the government has purchased their existing farms. There is also demand from those wanting a lifestyle change, but this buyer seeks land close to towns or airports, he says.
The breadwinner in the family then commutes to major centres such as Gauteng, on business, he says, while children attend schools in the vicinity and enjoy a more appealing lifestyle in the rural environment.
“We have also found that a number of ‘lifestyle farm’ buyers have relocated to the Karoo, where they can purchase bigger farms with their budget.”
Game farms are plentiful, but costly at R10 000 plus per hectare, while good quality stock farms, crop farms and smallholdings are in short supply. Key selling features are carrying capacity, location, and most importantly, security.
When looking to acquire farms for stock purposes, commercial farm buyers pay – on the LSU basis (Large Stock Unit, which equals 450kg of live weight): R15 000 per LSU for beef, R25 000 for sheep, R30 000 for goats and R40 000 for dairy cattle.
While interest in farms in the Eastern Cape has picked up, the gap between buyers and sellers has to narrow, says White. Until then, he says, activity will remain muted, even though the demand is there.
Farmers need to moderate their expectations, and the buyers need to be willing to invest/risk more, he says, a positive upturn in the economy has to occur before this will happen.
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