THE Australian head of Qatar's sovereign wealth fund-backed Hassad is calling for an urgent rethink on the federal government's policy on foreign land purchases, suggesting the new criteria will hurt land prices.
The Coalition has proposed that Foreign Investment Review Board (FIRB) tests include a lower threshold for rural acquisitions of $15 million down from the existing $248 million.
Hassad Australia's John Corbett said that policy had not been thought through and would damage values, The Australian Financial Review reports.
"When you start to talk about reducing the level at which transactions go to FIRB to $15 million, you are creating a whole new paradigm for the market," Mr Corbett told a BDO Agribusiness event in Brisbane.
"If you start reducing it to $15 million you are starting to take out a whole raft of investors in the market with potentially some significant consequences on prices as people try and sell large properties," he said.
"I think it is something that has not been well thought through."
The difficulty for Hassad is that it is unable to participate in rural property auctions and it cannot participate in a tender because both those require unconditional contracts.
Hassad cannot give unconditional contracts because all of its purchases would have to be approved by FIRB.
"The effects are that the property sells for a lower price than expected because there are fewer participants and then banks say 'well we have to get all the other properties valued in the region'."What denotes 'foreign' ownership
Rural division head for valuation company Herron Todd White, Tim Lane, said the real guesswork would be how an entity would be deemed foreign or not. He said Australian management companies could buy the land for an Australian-domiciled company whose investors are foreign.
He suspects that if foreign companies cannot participate in auctions and tenders then a particular segment of the market would feel some change.
"In recent times there has not been a lot of evidence of domestic players in the large-scale farms, so if the foreign buyers were not there than that would have an impact on that end of the market," Mr Lane said.
"However, the impact on value would be difficult to determine," he said.
BDO executive director Cameron MacMillan said attracting much needed capital to Australian agriculture could be hindered by such a policy.
"More onerous FIRB approval hurdles on agricultural property may push capital away from agriculture at a time when there are enormous requirements for global capital in this industry. Australian agriculture requires this capital to take advantage of the opportunities currently available so as to secure its position as an attractive supplier of premium agriculture products," Mr MacMillan said.