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![Page 1: Valuations of Rural Leasehold and Licensed land in Victoria Australia Simon A. de Garis Senior Lecturer School of Property Construction and Project Management,](https://reader030.fdocuments.us/reader030/viewer/2022032600/56649da95503460f94a96c33/html5/thumbnails/1.jpg)
Valuations of Rural Leasehold and Licensed land in Victoria
Australia
Simon A. de Garis
Senior Lecturer
School of Property Construction and Project Management,
RMIT University
Melbourne, Victoria,
Australia
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Where are we?
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Gippsland
Barwon South Western
Gram pians
Loddon Mallee
Hum e
M ildura
Sw an H ill
Gannaw arra
Buloke
Yarriam biack
H indm arsh
M oira
Cam paspe Loddon
Greater Bendigo
CentralGoldfields
N orthernGram pians
H orshamW est W im m era
Southern Gram pians
M oyne
Pyrenees
Ararat
Corangam ite
W arrnam bool
G lenelg
Colac-O tw ay
Q ueenscliffe
Greater Geelong
M oorabool
H epburn M acedon Ranges
M itchellM ount A lexander
Greater Shepparton W angaratta Tow ong
W odonga
I ndigo
M ansfield
W ellington
East G ippsland
La Trobe
South G ippsland
Unincorporated Vic
Bass Coast
M urrindindi
Strathbogie
Ballarat
Baw Baw
Alpine
Golden P lains
Surf Coast
Benalla
Gippsland
Barwon South Western
Gram pians
Loddon Mallee
Hum e
0 50
Kilometres
100
M etropolitan m ap
including Departm ent of Hum an Services regional boundariesand Local Governm ent Areas
Departm ent of H um an Services regional boundariesbased on Local Governm ent Areas
Australian Standard Geographical Classification 1 J u ly 2004H ospitals current at 26 August 2008
Regional Victoria
Victoria
Melbourne RMIT
Hume Dam Study Area
4 Hour Drive NE of City
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Valuation of less than freehold
• Little Research
• Paper seeks a dialogue with some practical outcomes
• Paper Key areas
• Market rental valuations of rural land
• Valuation of land held under lease
• Native Title issues
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Area of leased and licensed land in Victoria is small.
• 43,689 government tenants occupy 1,064,000 ha
• Private leases numbers are unknown
• Number to increase due to demographics and economics
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Rural Settlement Post 1825
• Landed squatters held large tracts
• Power of squatters gained by wool boom
• Victorian legislation of 1869 freed up land
• Settlers gain leasehold & freehold
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Native Title
• Crown Land
• Extinguished by Freehold Grant
• Basis - Traditional Laws & Customs
• Native Title Act 1993
• Mabo v State of Queensland
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North East Victoria
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Lake Hume Study Area
• Upstream of Albury/Wodonga
• Rainfall 715mm
• Average Maximum Temperatures– Summer 31.8oC– Winter 12.6oC
• Valleys - Murray, Kiewa & Mitta
• Diverse Soils - Vertosols & Shallow
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Literature Review
• Eves Study 2002
• NSW 1990-2000 Income & Capital Land Value - Annual Average Weighted Return
• Rural & Other Investments
• Rural - 10.75%
• Shares - 12.72%
• Bonds - 11.3%
• Property - 5.2%
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Bullivant v Minister 1936
• Flooding - Compensation - Hume Dam
• BFSL 100% Loss
• Peak Flood Area 33% Loss
• Higher Level 10 % Loss (blot on title)
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Case Study Area
• NE Water Resources - GM Water• Operates over 68,000 Ha - Controls 835
licences • Hume Dam Capacity 3,035,500 Mgl• Surface Area 20,000 Ha• Licensed Land around Edge of Lake Hume • 84 Licences Area 2-300 Ha• 2 Arms Murray / Mitta
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Rentals - Traditional Methodologies
• Percentage of Market Rental
• Agistment Rates
• Productive Value
• Gross Margin / Income Approach
• Analysis of Productive Value is Preferred
• Little Market Evidence
• No Organised Leasing Market
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Analysis of Recent Sales & Transactions
Freehold Land $2,030 - $6,200 per Ha
Freehold LeasesDistrict Leases $67 - $284 per Ha
Study Area Average $93
Rental Returns Historically 6% of M.V.
Agistment Rates Cow & Calf $5 / head / wk - Up to $9
G.I. per Year Cow & Calf $500
1 Cow & Calf = 15 DSE
G.M. Per Ha $ 140
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Application of Methodologies - Data
Rental Returns6% = $370 / Ha
3% = $185 / Ha
Agistment $130 / Ha
Productive Value $500 = $250 / Ha @ Rental of 50% = $125/Ha
Gross Margin $140 / Ha @ 50% Rental = $70 / Ha
• Land Value of $6,200 / Ha• 1 Cow & Calf = 2 Ha
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Methodologies Summary
• Significant Variation
• Land Value - Lifestyle Options - Rural Use
• Capital Gains - Value
• Agistment - Seasonal / Short Term:– Owner Responsible for Maintenance, Capital
Expenditure & Overhead Costs
• Productive Method Favoured by Farmers Over G.M. Approach
• Productive Method Ignores Lessor Overhead Costs
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Farmer Interviews • Agistment Not Realistic• Production or G.I. Approach • Cow & Calf Gross Income - $440-$500 / Year• 1 Cow & Calf to 2 Ha• Rentals $110 - $125 / Ha• G.M. Approach too General - Data Not Available• Alternative Approach - Assess DSE / Ha 7.5
x $16 DSE = $120 / Ha
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Crown Land Rentals - Methodology• Productive Capacity - DSE / Ha
• Multiplied $ Rate / DSE
• Equals $ / Ha Rent (Forest Leases $/Head)
• 33% of Total Productive Capacity Used as Basis for $ Rate / DSE. This is due to the following factors– No Exclusive Possession
– Lessees Pay Rates & Provide Benefit to Crown
– Lessee Has to Manage Pests Etc. & Non-Productive Areas
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Goulburn Murray Water• Some Conditions - Crown Leases Also Present
• Conditions of Licence Include:– Restricted to Grazing– Flooding & Weed Infestation – No Fertiliser– No Exclusive Possession
• Requires Reduction in Rental Rate / Ha
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Leases Other Issues• Terms & Conditions
• Rental Review
• Impact of Terms on Rental
• Valuation of Leasehold Interest - Capitalisation of Profit Rental
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Conclusions• Uncertainty for Practitioners as to Correct Approach to
Assess Market Rental
• Impact of Terms & Conditions Significant
• Market Place Indicates the Productive Capacity Multiplied by a $ Rate per Unit
• Lessees Reluctant to a Lease Agreement Indicating a Commercial Return to Capital
• Return on Capital is Low Compared to Other Investments
• Further Research Needed.
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Valuations of Rural Leasehold and Licensed land in Victoria
AustraliaSimon A. de Garis
Senior Lecturer
School of Property Construction and Project Management,
RMIT University
Melbourne, Victoria,
Australia