Commercial News

No dry spell for the Southern Cape farm market

Sustained upward price trajectory for well-watered farms of the Southern Cape

With prices on a sustained upward trajectory, well-watered Southern Cape agricultural land is the cream of the country’s farming crop

Seven years of good rainfall and equally good harvests have made agricultural land in the Southern Cape some of the most sought-after in the country, says Charles De Kock, owner of several Chas Everitt International franchises in the region.

“Prices for arable land here have more than doubled in the last three years and currently, land suitable for grain farming fetches at least R80 000/ha.”

Along with prices, farm sizes have also increased significantly, he notes. “A decade ago, 500ha was considered an economical farming unit. But mechanised farming, which greatly enhances productivity, also comes with substantial equipment expenses, so farms of 5000ha are now more cost-effective. As a result, big farmers are increasingly buying up their neighbouring farms. The previous owners then lease the land back from these farmers, who in turn, have the benefit of both a rental income and the capital appreciation on the land.”

De Kock says that there is a wide range of farms available in the Southern Cape. “The pasture-style farms around Swellendam, which have good access to water sources, are, arguably, the most prized. Here you’re looking at between R280 000/ha and R390 000/ha for irrigated land – although we recently sold a fruit farm in the region for R650 000/ha.”

Smaller “lifestyle” farms are also popular, but command higher prices per hectare, he notes. “Smallholdings of around 5ha or less will sell for R300 000/ha to R350 000/ha. These are completely different buyers – people who simply want to plant food crops for their own consumption and sometimes keep a few chickens and a sheep or two. Although highly desirable, they also have a far higher turnover than the large working farms.”

The buyers of Southern Cape farms are predominantly locals, but the semigration from upcountry to the Cape has also included a fair number of farmers, De Kock says. “This is particularly true of buyers from the Northern Province, many of whom have sold farms there as part of the government’s land-reform policy. Legally, if they reinvest the proceeds of these sales back into farmland, they are not liable for either capital-gains tax or transfer duties.”

He points out that buying a farm is very different to a residential property purchase. “Price is calculated on a number of factors, from soil quality to plantings to infrastructure. Prospective buyers also need to be sure there are no land claims on the farms they wish to buy. However, the most important consideration is, undoubtedly, water, and water rights can be a complicated business. We at Chas Everitt International offer a full-package service, which includes calling in independent appraisers so that, if we say a farm has a certain amount of available water, we can prove it.”