Legitimate beef or a load of bull?

So much for the feared China foreign investment invasion, in the first big COVID-19 foreign land sale Chinese investors have sold back a parcel of Australian grazing land six times the size of Hong Kong

9 May 2020 | Marcus Reubenstein (Image: Rocky Repro)

One of Australia’s biggest pastoral land transactions in recent years has made a mockery of suggestions that foreign investment laws had to be drastically changed in order to prevent Chinese buyers swooping on distressed Australian assets.

In 2015, Chinese billionaire Ma Xingfa purchased adjoining properties, which straddle the Queensland and Northern Territory border, through his Australian subsidiary TGB Agri Holdings Pty. Ltd.

That $47 million purchase of the 700,000 hectare Wollogorang and Wentworth Stations – run as one property along the Gulf of Carpentaria – was described in the industry as the pastoral “sale of the year.”

Last week the Queensland family owned McMillan Pastoral Company, picked up the property for $53 million, which included the land and 30,000 head of cattle. Taking into account money spent on improvements, the sale price actually represents a $1 million net loss for the previous Chinese owners.

Reports of COVID-19 Foreign investment overblown

As is the long-held practice in Australian politics, before Treasurer Josh Frydenberg officially announced on March 29 that Australia’s foreign investment review regulations would be significantly tightened, the story was leaked to the media.

In this case, Phillip Coorey from the Australian Financial Review got the scoop, telling readers “China spree sparks FIRB crackdown”. Publicly anyway, the Treasurer emphatically stated no country was being singled out by the rule change that drops the threshold for (FIRB) Foreign Investment Review Board reviews to zero.

At the time, a source close to the federal government told APAC News “China is absolutely the target” and “we don’t want the Chinese coming down here and buying up farms.”

As FIRB applications are reviewed confidentially, there are no public records to indicate whether the new regulations have stemmed the flow of foreign interest in Australian assets. However, a source within Treasury has confirmed they are dealing with a large influx of applications “overwhelmingly” because the threshold has been dropped to zero.

Vendors hurt by FIRB rule change

As to any evidence that foreigners are lining up to buy Australian farms, “There’s none whatsoever,” says Danny Thomas, Regional Director of CBRE Agribusiness.

“In my view there’s little justification for agricultural land to be caught up in this [FIRB] net. It has caused serious delay in a number of deals, many of them sub $10 million. This delay only hurts the vendors.”

Danny Thomas, CBRE Agribusiness

Those delays for vendors are potentially significant as the government has pushed the timeframe for assessing foreign investment applications from 30 days to 180 days.

That is likely to have a far greater impact on investors from countries other than China. Says Thomas, “Most of the capital comes from North America, Canada is the greatest weight of money at the moment then then the US.

“The balance of significant foreign investment is from Europe. There are investments made out of Asia and Middle East, and whilst it’s gets most of the attention, it’s much less than North America and Europe.”

Large livestock herds need water and thousands of metres of costly fencing to be maintained (Image: Elders)

As with many other Chinese investments in Australia, there seems to be a huge gulf between mainstream media rhetoric and reality. “Their participation was always overstated. There is no bias upward or downward to the overall level of Chinese investment in my view,” according to Thomas.  

No rural beef with foreign ownership

Agricultural sales agent, Alison Ross of Elders Real Estate Katherine in the Northern Territory, says there’s not been any foreign rush to pick up grazing land in the midst of the coronavirus crisis.

“In recent times we’ve seen strong interest from domestic buyers because the right investment in agriculture represents a good and reliable asset. Three years ago, we had a lot of Chinese interest but that started to drop off in the past eighteen months,” says Ross.

As for rural attitudes towards foreign land ownership, “It’s not a big issue for those on the land,” she says. “We’ve had foreign owners going back more than a hundred years with British pastoral companies and then Americans. Lately we’ve seen more interest come from South Africa and Argentina.”

Often, it’s foreign owners who’ve got the capital needed to spend money on badly needed improvements. “The recent overseas investors have not neglected the land, they’ve bought properties and invested into developing the infrastructure.

“You need water and wire to run a cattle station, and these property owners are sourcing materials locally. Their investment stays in Australia”

Alison Ross, Elders Real Estate Katherine

In the case of the Wollogorang and Wentworth Stations, over the course of four years, Chinese-owned TGB Agri Holdings spent $7 million on upgrades, mostly with local contractors and suppliers.   

Bull getting talked up in the cities

Well before the coronavirus crisis, the trend of agricultural assets returning to Australian owners had already begun.

Over 2019, prior to the latest sale in the Gulf of Carpentaria, some 2.2 million hectares of agricultural land had been sold back to Australian interests. The bulk of these properties were sold by British investors, with other holdings sold by Indonesian, Qatari and Filipino businesses.

In terms of land size, just two percent of those large agricultural land transactions involved Chinese investors. A 2019 report by Rabobank Research found that, by land value, foreign investors only account for 7% of pastoral holdings in Australia. While figures from Treasury and the Australian Taxation Office show that by area foreign owners have a stake in 13.4% of agricultural land.   

Contrary to another great misconception about foreigners ‘buying up the farm’ Australian government data shows that 81.8% of foreign-owned agricultural land is leasehold.

Thus only 2.6% of agricultural land in Australia belongs to foreigners on a freehold basis.

Based on the proportion of total Chinese agricultural holdings, in terms of outright ownership, Chinese investors own less than one-half of one percent of agricultural land in Australia.

Given 20% of Australian agricultural exports, valuing some $12 billion, end up in China, one might argue the Chinese have a disproportionally low level of investment in Australian farmland.