1. Has there been an increase in demand for grazing properties with carbon potential? Where is the most interest coming from?
Yes, particularly for grazing properties with potential for Carbon projects utilising Human Induced Regeneration (HIR) vegetation methodologies. These projects are best suited, easiest to implement and generally most viable from a project perspective within the larger scale, lower $/ha country in western Queensland and Western NSW.
Outside of these regions, there is a good level of interest for carbon projects across multiple methodologies (agricultural and vegetation) generally, both as a complement to existing agricultural enterprises and as stand-alone projects.
Interest is strongest from Corporate level companies and businesses both as an alternate investment class to typical assets or commodities. We have also seen a significant & recent increase in interest from an ESG (Environmental, Social and Governance) perspective and a move from national and internationally exposed companies seeking to be more carbon conscious and ideally carbon neutral.
2. Does a carbon project or carbon potential make a property more valuable/attractive/saleable?
A property with the potential for a carbon project certainly increases the options a seller has in terms of finding a buyer and extracting the maximum value from their property at sale. We would expect demand for this type of property from a potential buyer pool comprising traditional graziers/farmers, buyers seeking to implement a carbon project, and possibly a combination of the two. So yes, at present properties with the potential for a carbon project are more attractive to a larger potential buyer pool, and as such potentially more valuable and saleable.
For properties with a carbon project already in place, it depends greatly on how that project has been set up and what’s practically required from a property management (including sustainable grazing rates) perspective for that project to achieve the desired outcomes. I have seen examples of well-set-up projects where the carbon and grazing enterprises are a great complement to one another, and in these instances, I believe there would be a good level of demand for those properties.
There have also been several examples of rural properties with carbon projects in place, that has been publicly marketed for sale without success. It is imperative that landholders who are considering a carbon project for their property consult industry professionals (valuers/lenders/lawyers/accountants) who have actual and relevant knowledge and experience in the carbon industry, in conjunction with their project developer, from the start of the process, so that any potential value/saleability concerns can be appropriately managed.
3. How significantly can it increase a property's value?
Every property and project are different. There are potentially multiple scenarios that could apply for every property and project in terms of combining agriculture and carbon. Each scenario would represent a different outcome in terms of cashflows, carrying capacities, market value and practical management requirements etc. It’s also important to remember that these scenarios would change as the project moves through various stages from start to finish.
There are examples where a material change of use from a grazing property to a carbon project, or a combination of the two, clearly represents the highest and best use of that property, and as such would increase its value.
4. Alternatively, can a carbon contract hold back a sale?
The Carbon industry and more specifically the market for properties selling with carbon projects in place is relatively immature. There is not a broad understanding of the industry from all service providers involved within a carbon property transaction. There are select real-estate agents, valuers, lawyers, accountants and/or lenders that understand the carbon industry confidently enough to affect a transaction without lengthy time delays or issues arising from their lack of knowledge. Additionally, leasehold properties require State Government consent and in some instances the need to address native title as well. The combination of all or some of these aspects can certainly hold back a sale.
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