The impact of changed land use on farmland values and farmland valuations: An example from the south-eastern Nama Karoo

The main agri-trends in North America, Europe and Australia are being followed closely in various regions of South Africa. One such trend is land-use changes; the fact that some investors purchase farmland in South Africa to not farm – for the sake of investment only. Research that was done in 2011 in the south-eastern Nama Karoo confirmed that purchasers buy farmland at significant prices primarily as investments, although not on a grand scale. The research was done quantitatively and qualitatively. It was confirmed that in this part of the Nama Karoo, like in many other parts in South Africa, there is indeed a trend of new investors purchasing land for its sheer beauty and natural magnificence, something that they believe will increase in value and which is a sound investment for the future. Questions were asked: How might this impact on farmland values and how will property valuers interpret this changed land use? And, how should farmland be valued in future if this trend prevails and expands? The research confirmed that investors buy farmland for secondary (non-agricultural) reasons, which result in land prices almost double the average. Pure investment is a primary driver in the decision-making process and is based on a view that the future capital growth is enough to justify the investment. It was also shown that the typical investor is around 50 years old, financially extremely well off, and mostly professional. As potential non-commercial farmland owners, they are also not necessarily applauded by current commercial farmers.