LNP commits $75m to farm ownership scheme

The pilot initiative, coined the Future Farmer Guarantee Scheme, will commence on 1 January 2023 if the Coalition wins the federal election on 21 May.

The scheme would provide a 40 per cent guarantee for farmers seeking commercial loans to buy their first farm.

It will be capped to a maximum loan value of $1 million and with a maximum term of 10 years.

The maximum LVR for these loans has been set at 70 per cent. 

Applicants are required to prove that they have at least three years of relevant on-farm, or equivalent, experience in order to qualify for this scheme. 

Any recipients of the scheme experiencing "significant financial hardship” will be provided with an option to extend the loan term by two years. 

The Coalition has said that commercial lenders participating in the scheme would “provide loans for eligible applicants on terms agreed between the commercial lender and the borrower”.

Further, the scheme is intended to be administered by the Regional Investment Commission (RIC), which will be assigned $1.45 million to do so. The $75 million funding will come from “existing RIC appropriations”.

Federal Minister for Agriculture and Northern Australia, David Littleproud, commented that this scheme would address barriers towards farmer ownership by providing a means to accessing capital.

“Rising land values and the typical 40 to 60 per cent equity deposit required by commercial banks without this government guarantee mean that getting access to a bank loan to start a viable business is very difficult,” he said. 

“This support will help families access capital to assist with succession planning, as well as help those families and farmers getting into ownership for the first time.”

Mr Littleproud added that the government sharing the risk means that banks can “offer better terms to suitable applicants – lower interest rates and lower equity requirements”.

“Lowering the barriers for ownership for our future farmers is an investment in the future of regional Australia,” he concluded. 

The Coalition’s announcement comes in the wake of Prime Minister Scott Morrison promising higher property price caps for new buyers under the Home Guarantee Scheme from July this year. 

Under this amendment, Melbourne and Victoria’s regional centres will increase from $700,000 to $800,000, while the rest of the state went up from $500,000 to $650,000.

However, some industry figures are predicting that this rise still may not be enough to allow more regional Australians to enter the property market. 

Speaking to The Adviser, managing broker of the Geelong-based GSC Finance Solutions Matt Turner said: “We have seen a massive boom in house prices, to the point where first home buyers were struggling to find an established property within the price caps.

“I do question whether this is treating the symptoms of housing affordability rather than looking at the broader issue of housing affordability.

“While I think the increase in price cap is a necessary step, it does mean first home buyers will be lending more than ever to enter the property market and will be the most exposed when rates begin to rise.”

[Related: Rise in price caps a ‘little tight’ for some regions]