Rural outlook from property professional

Rural property outlook from real estate agent Peter Druitt.
Rural property outlook from real estate agent Peter Druitt.

As we move into autumn, it’s worth taking a look at the market for rural properties, both looking back at the last 12 months or so, and gazing into the crystal ball to see what’s going to happen in the future.

These autumn months, like the spring, are when we see most properties come onto the market, and it’s going to be interesting to see how it all plays out.

The first thing to observe is the strength of demand for quality rural holdings.

Every article you read in both the rural and national press, with quotes from selling agents, both corporate and others, at the moment talks about the strength of demand from a whole range of sources.

This, of course, is hardly surprising given the combination of factors coming together at the moment, including strong to extreme beef, lamb and wool prices, a pretty solid season over a lot of the country, and record low interest rates.

At the big end of the market this demand is coming from offshore buyers and corporates, who clearly see a big future in Australian agriculture, particularly with the growing demand from Asia.

There also remains, of course, the demand from the top end of the family farming operations, some of which are continually looking for growth to mesh in with their current operations.

This demand is being responded to in the agency sector, and we are seeing international property broking companies like CBRE and Colliers International launching rural divisions, head-hunting top personnel and spending big dollars on marketing.

In our local area, where we have few properties of the scale to attract these bigger type of buyers, the main interest is coming from either city based investors, many of whom are already invested in rural property but are looking to expand, and existing farming families.

This demand is strongest for the heavier type country that will grow crops and/or fatten stock, and in the case of many of the city based investors, of a scale that will support a manager.

At this point most of these purchasers are still demanding what they perceive as value for money, however we may see adjustments in what that level is if supply remains restricted.

Which all brings the conversation to the supply side. While there are, and will continue to be, substantial listings of properties for sale, numbers are certainly below historical levels.

Quoting figures from Landmark published recently, during 2016 overall farm sales for NSW were down by 8.9 per cent on the previous year, and of a total of 11,971 total transactions, 68.4 per cent were for farms under 40 hectares, or 100 acres. In fact, only 6.4 per cent, or 766 sales, were for properties of 100 hectares (250 acres) or more.

Looking at the local level, there were only 14 sales of 400 hectares (1,000 acres) or more between the Mudgee, Gulgong and Rylstone postcodes for the entire of 2016, and several of those were for bush blocks.

If we look at what’s immediately on the market in these areas, with the exception of the Cobbora Coal Mine disposal of assets, there are only three of what might be described as working properties for sale, and arguably only one of these represent an area that would justify a full time manager.

If this trend continues through the year, and at this early stage of the year everything points to that being the case, I can only see upward pressure for prices on attractive properties.

I don’t see this meaning crazy prices, I think buyers (and particularly those who finance them) will still be looking for some level of return on their investment.

Never-the-less, I can foresee a reasonably buoyant rural property market for 2017 for those properties that might be classed as stronger country. 

Peter Druitt is a Mudgee real estate agent.

He moved to the region in 1991 and started a real estate practice in 1993.