Re-evaluating the influence of carbon on property valuations

Beef Central, 09/11/2023

A LACK of professional guidance has been blamed for farms and grazing properties with carbon projects being mistakenly discounted in land valuations, research has found.

Research by the Carbon Market Institute, supported by AgriFutures Australia’s Carbon Initiative program, has found carbon projects have often been viewed as an encumbrance rather than an asset and property values have been affected as a result.

Greg Noonan

CMI consultant Greg Noonan said the research involved working with carbon farming supply chain actors to develop a guidance paper around valuations to improve practices titled Valuation of Rural and Agribusiness Properties.

“The carbon farming scheme in Australia has been in operation for about 11 years now and what we see are projects across vegetation, changing practices to enable carbon to be sequestered into soils, or agricultural practice changes typically around avoiding methane emission,” Mr Noonan said.

“There are a couple of roles for valuers. If there is a permanence element attached to a project and there is a mortgage over the property, the bank has to provide consent to the project. The bank will commission a valuer to look at the land assets and proposed project and give their assessment of what they think the impact of that project is on the land value.

The second role that valuers played in this market is for investors who are interested in getting involved in the carbon industry relying on a valuer to give their assessment of the project and the value of the project, Mr Noonan said.

“It’s been really challenging historically because it is a relatively new industry. It’s quite complex and it is quite niche and there’s a very specific set of skills required to understand how these projects work and what the impacts could be on land values.

“But as carbon farming becomes more widespread, we are seeing much more demand for valuers that have these skills across Australia,” Mr Noonan said.

Valuer and farmer Shaun Salter from Fraser Valuers in Queensland, said both valuers and banks needed to continue developing their knowledge to provide clients with the best possible advice.

“The biggest challenge as a valuer operating in the carbon space is firstly gaining knowledge of what is essentially a new market,” Mr Salter said.

“Often, we are confined by non-disclosure agreements therefore it is very difficult to obtain good, relevant data for us to adopt as a basis for valuation.”

Mr Salter also recommended producers and landholders build their knowledge base and educate themselves as best they can.

For more information and to watch the video on the topic, click here.


Source: AgriFutures










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