Two to three years of solid returns for most NSW broadacre farmers have driven rural property values to new highs, and this time it’s locals – not outsiders – doing the driving.
Although offshore investors and corporate interests have made some significant forays into the market, overwhelmingly the main demand for property in 2017 has come from established farm businesses.
Having notched up some healthy profits since commodity prices started heading north in 2015, farmers have been able to pay down debts and seize the opportunity of historically low interest rates to expand their operations.
Their expansion opportunities have been limited, however, by an historical dearth of listings, as farmers who might otherwise have been sellers sit tight and savour the return to profitability.
As a result, the rural property market’s supply/demand balance, which had presented easy pickings for buyers since the late 2000s, has moved decisively in sellers’ favour.
Selling agents’ estimates of market upward movement since 2015 range from about 40 per cent to as much as 80pc, depending on location, quality and seasonal factors.
But as Landmark’s corporate real estate sales manager Phil Rourke points out, these numbers need to be viewed in the context of the longer term, factoring in six to seven previous years of flat prices.
“When you look at it that way, the annual rate of capital growth is averaged down to seven or eight per cent, which is in line with long-term trends,” he said.
“It’s just that the rural property market has a history of moving in this way: plateauing for a period of years and then rising sharply in response to improved conditions, to establish a new plateau.”
A feature of the market during 2017 was the successful sale of several major properties that had failed to sell when previously offered. Some had been awaiting a buyer for 10 or more years.
While the accompanying table presents a cross-section of some of the sales of 2017 that made news, much of the sales activity this year occurred out of the public eye, in “off-market” transactions.
These included some of the big-ticket sales, such as the various aggregations across three states of the Sustainable Agriculture Fund, which is being wound up by its super fund investor owners.
Marketed by CBRE, and sold variously to local and international parties, the properties sold so far have grossed in total more than $180 million.
They include the Darlington Point irrigation farms “Tubbo” and “Huddersfield”, a five-property aggregation of prime cropping country at North Star and the 6786-hectare King Island cattle operation (which alone reportedly fetched $45m).
CBRE was also involved – along with local conjunctional agent Milling Stuart – in the successful sell-off of the 97 properties near Dunedoo of the state-owned Cobbora Holding Company.
Acquired by the government during 2009-10 to make way for an open-cut coal mine, until that plan was abandoned, the properties were marketed over 12 months in six stages, by auction and private negotiation, generating intense local interest and competition.
By the time the sales process concluded in October the sales program had seen about 43,000ha sold for a total sum of $74.8m.
CBRE director Colin Medway said the market had become “noticeably stronger” with each successive stage, providing a running barometer of the industry’s rising optimism.
“I have never seen a greater appetite for agricultural assets in my 23-year career,” he said.
Another long-standing agent who is monitoring the market’s upward spiral is Chris Meares of Sydney-based Meares and Associates, most of whose 2017 selling activity has occurred “off market”.
The company’s November auction of “Woodlea Park” for $11.75m was well publicised, but it’s just one of a string of sales totalling about $60m that Mr Meares has effected since October.
He said the sales included prime farming properties and higher-rainfall grazing properties, at values generally 20-30pc (and in places, more) above levels of 12 to 24 months ago.
In favoured areas of 600mm to 750mm average rainfall, some of the record prices now being achieved were equivalent to $650/DSE for sheep and up to $14,000 a cow area.
Mr Meares said assuming commodity prices stayed strong, similar market conditions – including a shortage of quality properties for sale – were likely to prevail in 2018.
However, it was also likely that after enjoying two or three years of high returns, some “prudent” property owners who had been deferring a sale might decide it was time to move, while the market was firing.
One of the property market “hot spots” of 2017 has been the South West Slopes, fuelled by a bumper harvest in 2016 and record livestock prices with mainly good seasonal conditions this year.
Among the agents riding high on the surging local demand has been Miller and James of Temora, whose office has settled 35 farm sales this year, with 15 more due to settle in February.
Sales representative Gus McLaren said a highlight had been the sale of “Oakrise” at Barmedman, which set a district price record of $4006/ha ($1622/ac) when sold at auction in September.
A chronic scarcity of listings is the biggest problem reported by agents, and not just in “blue ribbon” areas, but also in the pastoral country of the Western Division, despite a year of tough seasonal conditions.
Veteran selling agent David Russell of Landmark Russell at Cobar said his office would normally have eight to 10 rural properties on the market at any one time, but now it has just three.
“In thirty-five years of selling real estate in the Western Division, I haven’t seen a stronger market – for everything from small ‘starter’ blocks to large aggregations,” he said.
“Inquiry is coming mostly from eastern and southern grazing interests, but also from corporate and offshore investors wanting properties to run 15,000 to 30,000 DSEs.”
Notable sales for 2017
Achill West, Armidale: 2216ha, improved grazing, $8-$8.5m range (Meares and Associates, Sydney);
Boggy Creek, Bellata: 904ha blacksoil cropping, more than $5.7m (Michael Guest, Rural Property NSW);
Bonny Rigg, Rowena: 3500ha mixed farming, $8.5m (Rural Property NSW);
Crawney Station, Murrurundi: 1964ha Upper Hunter grazing, $4.9m (Ruralco Davidson Cameron, Tamworth);
Earlstoun, Guyra: 385ha, improved grazing, $4m (Ray White Rural, Armidale);
Five Mile and Garawan, Breeza: 1168ha blacksoil farming, with 747ha developed irr., sold in two portions for close to $15m (Moree Real Estate);
Glen Alvie, Ebor: 2147ha highly improved basalt grazing, $17.5m (Ray White Rural, Armidale);
Kingsford/Sun Valley, Armidale: 715ha improved basalt grazing, $8.67m (Webster Nolan/Landmark Boulton’s, Walcha);
Leander/Wyangan, Gunnedah: 1354ha blacksoil cropping, $11.4m (Elders Gunnedah);
Overdraft, Mullaley: 1511ha blacksoil cropping, sold after passed in at $9.6m (Elders Dubbo and Gunnedah);
Temi, Willow Tree: 1980ha basalt hill grazing, abt $3.2m (Rural Property NSW);
Weegoona, Nowendoc: 550ha, improved basalt grazing, $3.925m (CBRE).
Central and Far West
Bogee, Rylstone: 1045ha Capertee Valley grazing, pre-sale guide $3.4-$3.08m, sold post-auction (Webster Nolan, Sydney/ McDonald Lawson, Mudgee);
Mount Kew, Ivanhoe: 46,094ha pastoral grazing, carry 12,000 DSE, $4.5m (Landmark Russell, Cobar);
Raeburn, Narromine: 1847ha mixed farming, $5.9m in two portions (Landmark Wilson Russ, Warren);
Raby Station, Warren: 9782ha mixed farming with irrigation, believed to be $16m-plus (Landmark Sydney and Warren);
Riverview, Peak Hill: 2636ha mixed farming, Merino stud, $7m (Barlow and Peadon Schute Bell, Dubbo/Webster Nolan);
Road View, Narromine: 1252ha mixed farming, $4.2m (Hartin Schute Bell, Narromine);
Talyealye/Karto, Hungerford: 105,000ha pastoral grazing, carry 21,500 DSE, $5.3m (Landmark Walsh Hughes, Bourke/Llewelyn and Co, Merriwa);
The Bridge, Borenore: 613ha improved grazing, $7.8m (Peter Fisher Real Estate, Orange);
Wingarra, Bylong: 910ha improved grazing, irrigation, $4.5m (Peter Druitt and Co, Mudgee);
Woodbury, Gresford: 832ha Paterson River grazing, $2.265m (Webster Nolan/ Dillon and Sons, Dungog).
Abingdon, Gundagai: 2198ha, Murrumbidgee River grazing, around $15m (Webster Nolan/ Elders Gundagai);
Coopers Island, Bodalla: 319ha coastal dairying, $3.9m (Webster Nolan/ Whale Coast Realty, Narooma);
Eastleigh, Golspie: 520ha improved Southern Tablelands grazing, $3.125m (Elders Goulburn);
Rockybah, Nimmitabel: 1378ha basalt grazing, sold after passed in at $2.45m (Meares and Assoc. and Fergusson Real Estate, Cooma);
Tulla Park, Yass: 843ha improved grazing with approved subdivision, $8m WIWO (CBRE);
Twin Hills, Cootamundra: 1000ha improved thoroughbred breeding, believed to be around $12m (Inglis Rural Property);
Wharekarori, Crookwell: 596ha improved basalt grazing, sold after passed in at $4.175m (Elders Goulburn);
Willows, Cootamundra: 1336ha basalt mixed farming, $11.5m (Inglis Rural Property);
Woodlea Park, Yass: 1678ha improved grazing, $11.75m (Meares and Assoc).