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Agricultural properties in high demand

06 Dec 2013

The demand for farmland in South Africa is continuously growing with both established local farmers and new entrants buying up farms.

Established farmers tend to buy land adjacent to their current property, which results in better utilisation of their current fixed asset base with more cost efficient units, while new entrants to the market are mostly weekend farmers, who tend to buy properties that don’t require high running costs, but rather offer safety, scenery and lifestyle.

With many farmers aging and their offspring not interested in farming, there have been a flurry of agricultural sales, many of them via the auction method, according to Andre du Toit BKB Properties general manager.

Du Toit explains that established farmers tend to buy land adjacent to their current property, which results in better utilisation of their current fixed asset base with more cost efficient units, while new entrants to the market are mostly weekend farmers, who tend to buy properties that don’t require high running costs, but rather offer safety, scenery and lifestyle.

The larger units that come to market are usually due to other reasons.

One such sale was that of Peter Pentz who sold a portion of his crop and livestock land.

“We decided to increase our focus on our winery business, therefore selling some of our crop and livestock property to reinvest in our wine cellar and vineyards,” says Pentz.

Smaller units coming to market often struggle to justify their high production and capital costs and rather opt for selling and cashing in on their investment.

According to Du Toit, the one common factor in these sales is the use of the auction method.

“At the moment the auction method is proving the most successful way of buying and selling agricultural properties.”

He says BKB is capitalising on this increase in demand and supply and is enjoying a sustained period of successful farm auction sales.

Recent farmland sold by BKB totals more than R200 million and includes Brimmscombe in Hanover sold for R6.8 million due to retirement of the previous owner and Sante Bonne in Groot Brakrivier sold for R5.25 million. This property was initially bought by a Chinese syndicate who intended to use it as a holiday destination.

Brakrivier in Darling was sold for R8.85 million, Kiesenbosch in Malmesbury sold for R8.3 million due to retirement of the owner and Zoetwater Vlakte in Reitz was sold for R6.1 million as the owner wanted to decrease his farming activities.

Du Toit says they sell via auction but also via tender and private treaty if suitable.

In general, call prices are on the up and sellers are reaping the benefits of a decent return on their investments, he adds.

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