Green pastures for rural property

Driven by institutional investment, some generally favourable weather and high commodity prices, rural property markets are enjoying a relatively bountiful time. 

But almost mirroring conditions in residential property, the notable exception remains Victoria. 

The rural sector is effectively enduring a lockdown within a lockdown, and COVID-19 arrived as an avian influenza also shut down numerous poultry farms, depressing that market even further.

But a combination of improved seasonal conditions across other states and generally good grain and livestock prices is prompting strong investor interest. 

It is also spurring a desire among young people to return to the land and city dwellers to flee to the regions as rural property enters the typically busy spring marketing season.

With an entry price of between $3 million to $4 million to purchase a farm that would generate a sustainable living income, commercial enterprises are the buyers that are driving the market.

Speaking to Australian Property Investor Magazine, the general manager of Nutrien Harcourts, Mark Brooke, said demand for rural property was strong.

“Over the last 10-20 years in Australia, the entry level requirement for investment in rural property has multiplied extraordinarily – and the industrialisation of the ag/farming sector now means that investment is generally now institutional, or large-scale participants already in the sector,” Mr Brooke said.

“Nationally, property supply levels are extremely low as has been the case for some years. 

“While transaction numbers are down, and there are fewer listings, total value of sales however is up, and demand continues to be exceptionally strong on the back of historically low interest rates and high sustained commodity prices.”

Colin Medway, Senior Director of national Melbourne-based agribusiness and land transaction and development agency LAWD (Land, Agribusiness, Water, Development), said that on top of strong local demand for property, interest from overseas investors seeking a safe investment haven in Australia was contributing to strong growth but it was family farm businesses that remained the engine room in the market.

“I think there is a new wave of young people seeing agriculture as a viable long-term career and certainly there is a run of them coming back to the land,” Mr Medway said.

“Those family businesses often need to expand to accommodate this growing workforce.” 

Mr Medway says the rural property market is as strong as he has ever seen it. 

“We’re encouraged by the pipeline of demand we have for the spring and the assets we have to take to market,” he said.

Mr Medway identified the south west slopes of New South Wales as the hottest market at the moment.

A recent Rural Bank report cited the median price per hectare of farmland traded last year in NSW increased by 17 per cent to $5000 a hectare.

As for the impact of the COVID-19 virus, Mr Medway said LAWD was advising clients it was having no impact apart from the inconvenience of being able to cross borders to inspect properties.

Herron Todd White’s recently released Month in Review – October 2020 found that despite the anxiety presented by the Coronavirus world, primary producers throughout the nation are discovering just how valuable their rural assets are.

New England/Tablelands rural properties, near Tamworth, were performing strongly with assistance from improved seasonal conditions and many landholders experiencing one of the best seasons in some time. 

While there has been some softening in commodity prices, especially for wool and sheep, there has still been continued demand for grazing holdings, particularly in higher rainfall areas. 

The report found that despite the pandemic, demand for rural holdings continues to be strong, with recent sales indicating land values are still trending upwards.

Notable transactions include the sale of Culgoa/Seymore at Nowendoc for $10.78 million ($3,400 per acre) in May 2020 to an adjoining landholder expanding their operations. 

This property previously sold for $9.9 million in May 2018 and represents an eight per cent increase in two years despite severe drought conditions throughout 2018/19.

Queensland grazing

Central Western Queensland sales, although based on limited sales data, have shown increases of up to 25 per cent above 2018 and early 2019 levels. 

Some sales south of Longreach are nudging $375 per hectare, which is around the levels of the previous market peak in 2007/08.

The Herron Todd White report determined there may still be room for some upward movement once a decent seasonal break has happened.

Rural property sales agent for Elders Brisbane, Garry Martin, said the strongest rural market in the state is Central Queensland due to high cattle values.

“It offers good quality farming and grazing country and when a property in this area is listed for sale it attracts strong competition,” Mr Martin told API.

“The only impact COVID has had on rural land sales is the fact that interstate and international buyers have not been able to inspect properties, however, the strength of well-established state-based grazing families appears to counteract any COVID issues.”

Unlike NSW, Mr Martin said the vast majority of rural sales in Queensland have been made to individuals, with only a relatively small number of sales going to high net worth investors or institutions.

“The market is being driven by two factors, one being the current high commodity price for beef and the second a distinct lack of quality properties being on the market, and with the possibility of some good rains coming this season we may see an increase in the number of properties coming onto the market as vendors take the opportunity to exit their holdings while they are looking good,” he said.

“Corresponding rains may lead to an increase in cattle prices, particularly for store type cattle, as drought-affected graziers look to increase their herds and income.”

Rabobank recently concluded that macroeconomic factors, such as low interest rates and a forecast weakening in the Australian dollar – along with the overall healthy state of farm balance sheets across the country – would prevent a major downward correction.

Rural intelligence company Digital Agriculture Services co-founder and CEO Anthony Willmott said science and technology was helping to take land analysis to the next level.

“We now have better indicators than just median price to find the best value, and we predict that productivity will play an increasingly-important role in finding the right farm property at the right price,” he said.

“We have always believed that buying any farm should be determined by its ability to produce now and into the future, and now we have the science and data to prove not just the productivity of any property, but how it compares to any best in class property.”