Property prices on rise

And vendors will be the winners with land values set to continue to climb with confidence among rural businesses, but also demand from outsiders considering agriculture to be a wise investment.

Grazing properties are top of the shopping list after the beef price rise in the past 18 months and continued strength of lamb, mutton and wool.

The only areas of slower demand are dairy, impacted by the low world milk price, and lower quality vineyards.

Elders SA/NT rural real estate manager Phil Keen says it has become a “sellers market”.

Agriculture has become an attractive investment with low returns for cash with some uncertainty in the stock market and little confidence in the commercial investment area.

This has prompted potential sellers to hold onto their assets but also brought considerable demand from investors seeking better returns.

“I remember selling steers for live export in the late 1990s for $2.05 a kilogram to $2.10/kg and we were not getting any more for bullocks until recently,” Mr Keen said. 

“The recent cattle price rise is impacting positively in the property market.”

In cropping areas, after several high-yielding years, Mr Keen says not only large, but also small and medium farmers are looking to increase their holdings, adding to wider and more intense competition.

Despite the increase of buyers actively in the market, Mr Keen says banks are being more measured in their lending, ensuring potential buyers can generate sufficient cash flow from new acquisitions to make repayments, and not just rely on equity.

This may keep land price rises relatively in check.

Mr Keen says he is “glass half-full” and looking forward to an active spring.

“There has been a big change,” he said. 

“Back five or six years ago we may have got three to four buyers competing for a property, but a couple of years ago this often became one or two and while people were not selling below market value it took longer to sell.

“That has all changed with more people coming to the table.

“In the next three to four months we will know how it will affect market prices.”

Ray White Rural SA and Clare Valley principal Geoff Schell says supply of good quality rural land has remained tight in the Upper, Mid and Lower North for the second consecutive year, but believes demand is as strong as it has been for “some years”, especially for mixed cropping and grazing and specialist grazing properties.

After four or five years of prices remaining relatively stable, Mr Schell foresees some modest increases in new season sales.

“We are seeing those businesses with cropping properties who might be running a few sheep looking for additional grazing land and looking to increase their livestock numbers, and they are willing to expand out of the area looking 50 kilometres to 100km away,” he said. 

“In the past couple of years we have also seen investor interest in quality farming land in the Lower and Mid North region.”

Mr Schell says this outside investment has led to two of their sales going to investors in the past 18 months, one in the Marrabel area and the other at Farrell Flat where investors have purchased rural land and the vendors have leased their properties back.

“Quality agricultural land is being seen as a strong, reliable investment with good long-term prospects,” he said.

“The annual returns have not traditionally compared with other investments, but today they are more than comparable, and in some cases better, and the outlook for further capital growth is also good.” 

SAL Real Estate rural land salesperson Cameron Grundy said South East property prices could increase by 15 per cent to 20pc this spring with tight supply and a long list of buyers.

Last spring there was an upturn in the market but he expects land values to climb back above their pre-global financial crisis levels.

“We have a number of people looking to invest $2 to $3 million to add to their existing holdings and a number of small corporates or large family enterprises not exposed to agriculture which want to be in it because of the good returns,” Mr Grundy said.

“Strong livestock prices for sheep and cattle have seen farmers enjoy several financially rewarding years, despite the season not always going with us. This has added to pent up demand.”

Mr Grundy is encouraging those looking to sell to take advantage of the strong demand by listing this spring.

He said SE grazing land was still good value in comparison to many regions and had an “enviable reputation” for livestock production with access to good underground water for both stock water and also irrigation, and excellent access to eastern state markets.

There had also been increased demand for trading irrigation water licences since the new SE Water Allocation Plan had been adopted. 

Some water management areas were facing significant cuts and producers were looking to buy volumes to continue their irrigation activity. This was presenting opportunities for those with unused water licences to trade them at good rates.

An example was the recent sale of water from Wattle Range to Mount Gambier for just above $1000 a megalitre.