THE rural property market has ended the year on a positive note, following a run of successful sales and amid reports of strengthening inquiry from local and offshore investors.
Agents say the volatility of global markets and the growing international focus on food security are making rural property an ever more appealing investment option.
But while this heightened interest from serious investors has resulted in a spate of big-ticket land sales in NSW, this “top end” activity has not as yet sparked a general market recovery.
Auction clearance rates this year ended up no better than the previous year’s level of around 33 per cent, mainly reflecting the continued dearth of “neighbour-to-neighbour” competition.
Landmark’s NSW real estate manager, Phil Rourke, said it would take a good wheat harvest to fill farmers’ coffers to the point where they could re-enter the property market.
“I had hoped this might be the year, but although we had terrific crops, the returns aren’t there due to the wet harvest, which has been a big disappointment,” he said.
“It won’t be until we get neighbours back in the auction room trying to buy the farm next door that we’ll see clearance levels edging back above 50 per cent, and prices recovering.”
The auction room itself holds the key to a market recovery, according to Elders Dubbo rural property specialist, Richard Gemmell.
He says it won’t be until a critical mass of sales is being achieved at public auction, and openly reported, that people will regain confidence in market price levels.
(Many of the sales reported in 2011, by contrast, were negotiated privately, or post-auction, at “undisclosed prices”.)
As far as prices are concerned, 2011 saw a continuation of what some analysts are describing as a “two-speed market”.
In this market, the high-quality, well-located farms offering the strong cashflow and scale sought by investors are holding their value – or in some cases, even posting modest gains.
But the “middle order” properties have suffered an easing in price from the market peak, ranging from about 15pc to 30pc, except for instances where competing neighbours lock horns.
Worst affected have been “family size” mixed farms in the grain belt, where cash for farm expansion is still in short supply, and irrigation farms, where a run of poor seasons has now given way to uncertainty about future water entitlements.
On the other hand, the breaking of the drought coupled with steep rises in wool and livestock returns has revived neighbour interest in high-rainfall grazing properties.
Colin Medway of Landmark Harcourts at Yass has been in the thick of this trend, achieving successful outcomes of all but one of his rural property auctions this spring (and the one still unsold is expected to go soon as well).
Interestingly, all but one of the properties he has sold this year – with a gross value of about $46 million – have been bought by established farmers.
Mr Medway said the improved grazing returns were starting to be reflected in land price levels, with pasture-improved country that was previously selling around $270-$280 a dry sheep area now edging above $300.
Similarly in the New England, the better-quality grazing properties are holding their values, according to Scott Waters of Chris Ward Property Sales, Tamworth.
He said the best cattle country was still commanding values of $6000-plus for a cow area, with mediocre country fetching $5000-$6000 and “rough” country down to $3000 or less.
One market segment still doing it tough is the lifestyle property sector – a boom market in the early 2000s, but now oversupplied and no longer luring the city buyers that were its mainstay.
Chris Meares said this could change in the next 12 to 24 months as a new class of cashed-up buyers emerged from the prosperous mining and finance sectors.
But he said these new buyers would be looking for more than just fancy homes on acres: “They’ll need to see cashflow potential to justify their purchases.”
In the absence of Sydney buyers, the lifestyle farm market in most rural areas is now limited to low-budget (well under $1m) sales accessible to local townspeople.
Richard Gemmell said the slowdown in sales of larger farms had also affected sales of lifestyle properties, as many of the latter had traditionally been bought by retired farmers “down-sizing”.
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