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2016 Winter - Understanding the value of agricultural land

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FPJ1302B - Lane, T (2016), The Valuation of Agricultural Assets in Australia

FPJ1302B - Lane, T (2016), The Valuation of Agricultural Assets in Australia, in Farm Policy Journal, vol. 13, no. 2, Winter 2016, pp. 1-11, Surry Hills, Australia.

The valuation of agricultural assets in Australia underpins the agricultural land market for purchasers, sellers (vendors), neighbouring farmers, and the banking and investment sectors. The rigour and accuracy of the valuation process is imperative for all these users. There are a myriad of methods and approaches used to value agricultural land. This paper documents those and the other influences including historical sales that can affect the valuation process. Valuers often only have limited access to vital information like farm performance data, seasonal conditions, commodity price fluctuations, buyer motivation, and locational advantages or disadvantages. As a consequence, a valuer can find it quite challenging to apply a capitalisation rate for investors, and give them indicators of potential investment returns that are utilised commonly in the corporate investment world. This is exacerbated due to the need to recognise that successful investment in agricultural land requires patient capital, and that annual operating returns are heavily reliant on the capacity and capability of the individual farm manager.




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