Victorian property prices skyrocket as farmers look to expand

In February, a 259-hectare (640-acre) block in Lillimur South in the Wimmera sold for $6820 an acre, which broke records for the district and was a 42 per cent increase off nearby land sales in 2019.

In the following weeks, a 125-hectare (308 acre) lot at Lower Norton, south-west of Horsham, fetched $4800 an acre, while a 129-hectare property in the Kalkee Plains, also in the Wimmera, sold for $5450 an acre.

In March, 179 hectares near Ararat sold for $23,582 a hectare or $9550 an acre.

In the same month, 252 hectares between Marnoo and Wallaloo sold for $15,569 a hectare or $6300 an acre.

A 347-hectare property at Miga Lake set a Wimmera record, selling for $19,140 a hectare or $7750 an acre.

Charles Stewart Western Victoria director Andrew Dufty said the market had been steadily increasing since spring 2019.

Mr Dufty said at the beginning of the pandemic there were concerns that property and commodity prices would drop.

"But what we've seen is the break in the drought in the north has driven cattle prices up to record levels, we've seen strong grain returns from the cropping guys both in the north and locally... and sheepmeat prices both for mutton and lamb continued to be very stable," he said.

"From a commodity perspective, things are pretty strong.

"Interest rates have gone down as a result of various stimuli put in place.

"You get strong and reasonably stable commodity prices, and low interest rates, and lack of supply of quality properties, and people are in the mood to buy.

"That's just caused prices to increase across the board."

He said properties had sold up to 15pc more than the expected value.

"We've thought we've been relatively correct but the market's surprised us and gone higher again," he said.

Farmers were selling for a number of different reasons, he said, but there were patterns emerging when it came to buyers.

There was still some interest from the north with people looking for country with higher rainfall totals, but in most cases buyers were local operators who were looking to expand by purchasing neighbouring properties.

"We had an auction about a month ago where we had four live bidders and probably another three parties there that were there to bid, but the property started at a level that was higher than a level that they were prepared to start at," he said.

"We potentially would have had six or seven bidders at auction which is a very high number historically."

He said the market was unlikely to change while commodities were strong and interest rates low.

"If any of those fundamentals change then that may tip the market perhaps to more of a stabilised situation, but failing that we can't really see any downward pressure on the market at the minute," he said.

A report in Rabobank's Agribusiness monthly found that in the short term, the land market fundamentals were extremely strong.

It noted that over the past six years on a national level, the fundamentals were the most supportive they had been over the past 30 years.

The report found that a downward correction in the next 12 months was extremely unlikely and also pointed to stable prices in the medium term.

For nearby farms, the high property prices can have a negative flow-on effect.

The Victorian Farmers Federation Stakeholder Policy and Advocacy advisor Charles Everist said the big concern was that farmers would face massive rates increases following property valuations.

Mr Everist pointed to the Horsham Rural City Council, which put out its draft budget for consultation earlier in the week and would see farm rates rise by an average of 10pc based off a 27pc total farm valuation increase for the shire.

Victorian Farmers Federation Grains Group councillor Ryan Milgate farms near Minyip in the Wimmera.

Mr Milgate agreed that local government rates were a big concern for farmers.

He said the 1.5pc rate cap introduced for Victorian local governments could have been better implemented.

"We'd like to think that 1.5pc is a rise for each category, so rather than 1.5pc across all ratepayers and farmers get a 10pc rate rise, we'd like to see everyone share the burden," he said.

"No one's against paying rates, what the issue is is the rates are just jumping so much every year.

"We're talking 10pc this year, there was a similar rise last year, a similar rise the year before."

He said in isolation, a rates increase should be manageable, but the cost of insurance and other overheads were also rising.

The skyrocketing property prices also did not change the earning capacity of the land.

"That piece of dirt is still the same bit of dirt it was five years ago in most instances - it hasn't really changed what it is - but the value's gone through the roof," he said.

Mr Milgate said the VFF had engaged with local governments.

"It's just the whole system - we really need to go back to the drawing board," he said.

"We're working with a system that comes from 150 years ago and time's moved a bit from there.

"We don't want to see these rate shocks year after year."