Argentine’s farmland in USD terms collapses: experts reveal which locations to now invest in
As in other sectors, the pandemic has been making itself felt in the worst possible way and that is in rural real estate activity. So, what are the areas to invest in?
The paralysis evidenced by the lack of sale of properties in the urban areas, rural real estate activity also transits one of its worst moments with operations close to zero in the past two months. These same indicators are the one that opens up opportunities for investors with cash, with the prices in key areas of agricultural production areas that operators already 20% or more below the previous values before the emergence of covid-19 and the establishment of quarantine.
This percentage of decline, marketers point out, is valid is for almost all of the most attractive agricultural areas. But among rural real estate sales companies, they also recognize that in marginal agribusiness, locations rebates can approach 50%.
Farmland in Formosa, Salta, Corrientes, some areas of Tucumán, Patagonia and even in the southern part of the province of Buenos Aires, are now marketed at unthinkable values compared to last year.
Opportunities also arise in Rio Negro, a province that according to real estate experts has enormous potential for the development of activities such as livestock and the exploitation of milk through dairy farming.
“In such a complex scenario for the economy, in general, we are encountering movements in terms of consultations and valuations.
However, there is a very positive horizon because it is well understood that the world will need more unpolluted food.
The farmland then reappears as a favourable option, Federico Nordheimer, director of rural real estate company told iProfesional.
“Today the interest in farmland also makes sense in so far as there was no government intervention in rural activity unlike other areas of the economy. Exports have not been affected, and livestock activity remains unchanged. For those who have saved in dollars, it is a unique opportunity because prices can be negotiated downwards, in some cases by very important percentages. Good farmland guarantees an income and whilst the owners are not desperate to sell, they listen to offers,” he said.
Nordheimer explained that, depending on the areas, prices have fallen by 50% and that such a change in values is actually a continuation of the depreciation of farm prices that began to take shape in the second half of 2019.
“There is a scenario of values that fell from the result of the PASO and what we see now is a decline that continues to expand. Today any field whose hectare price was in the order of USD 400 can be quietly traded for half that value.
In key areas of the north of the province of Buenos Aires, we can find fields whose value has dropped 20% in recent months”.
Looking at examples of securities, the expert detailed that in the central and southern province of Buenos Aires there are fields that are listed at a rate of USD 3,500 a hectare – a decrease of 30% from the first half of 2019 – whilst in the west of Buenos Aires Province a hectare can be traded at USD 5,500 – a fall of 20% compared to last year.
He also stated that in the core farming regions the values depreciated by about 20 %, so the hectare rate is now in the order of USD 12,000. Both the north of the province of Buenos Aires and the south of Santa Fe show a decline that will intensify in the second half of the year he said.
Nordheimer also noted that at the edge of Santa Fe with the province of Córdoba the values accumulate a decrease in what goes from 2020 of the order of 15%. In that area, the farmland holds a value of the order of USD 10,000 a hectare.
In other areas of Argentina, the fall in prices becomes more apparent. The interviewee told iProfessional that in the horticultural valleys of Cuyo in Mendoza Province the value of the land has been declining of up to 25 %, even in the areas of highest wine production.
“The hectare value went down to values of about USD 13,000, which was unthinkable a few years ago.
Of course, especially in Mendoza, the variation is very strong, since the province has its peculiarities in terms of water availability, rationing and irrigation capacity.
Areas that do not have the greatest attributes in that regard today have land with values close to USD 400 a hectare. The difference is huge,” he said.
Nordheimer highlighted the investment opportunities of farmland today on sale in Rio Negro Province. “It’s a Province where you don’t have a strong dependence on the climate to produce. At the same time, there is water in abundance. The only point against it is that you have to invest in the infrastructure to start production. But there are very attractive farms for their potential for livestock and dairy farming,” he said, and then indicated that in that territory of Patagonia it was possible to find hectares of USD 6,500 – down 30% from 2019.
Already in the rest of the southern tip of Argentina, the valuations fluctuate widely according to the agricultural or tourist potential of the land. Thus, whilst in Patagonia’s prime farming areas a hectare can reach USD 4,000, in the centre and west of the same area the price of the hectare does not normally exceed USD 400 dollar.
Farmland value forecasts are grim
From the Argentine Chamber of Rural Real Estate (CAIR) its vice president, Gerardo Kahn – in addition to pointing out to iProfessional that the sales have been close to zero in these times of pandemic – predicted a higher price decline from the surveys that the entity has been doing among its partner operators.
“There is a predominant sense of values will go down further. This is the prevailing view among operators. They point out that this price drop will be in a range of 10 to 20%. Traders agree that in order for there to be a revival of the sale the values have to shrink a little further,” he told the company.
“Beyond that prognosis, opportunities are incredible for those with dollars in their hand. Of course, everything is subject to negotiation, and it is worth remembering that this scenario is not that like the 2001 crisis.
In other words, landowners don’t suffer from indebtedness so they don’t despair about not selling either. But there is a growing predisposition to listen to offers,” he acknowledged.
Kahn acknowledged that “in marginal areas, possibilities arise from owners who accept discounts of up to 50%”, and stated that apart from the sale option “there is a very strong, very active demand for farms for lease”.
One challenge is that lawyers and notaries are still not working in a normal way thus slowing transactions. Once those kinds of complications are overcome, there will be another perspective to move forward with sales,” he concluded.
Source: iProfessional ( translated )