Buy, Sell, Sold Strong demand and price growth spurs rural property market

 

Since the beginning of time in order to survive and thrive, humans have traded, bought and sold. Within our very DNA is a desire to know what things are worth, and none more so than in farmers when it comes to land and property values.

The difficulty with rural parcels is determining the true value and return on investment each holds, its historical and potential performance with regard to productivity, what people in an area are really paying, and then how sellers can get the best price or buyers can recognise and negotiate a good deal.  

The true investment value of agricultural land lies with long-term capital growth, rarely is it bought and sold as a way to make a fast buck.  As American share trading and business magnate, Warren Buffet, once quoted, “It’s the time in the market, not timing the market”.

Since spring of 2015 there has been a rapid spike in prices in the rural property market in NSW.  It last peaked in 2006 but by 2011 had fallen by around 20 per cent thanks to widespread devastation after 10 years of drought. However, since 2011 with the cessation dust storms and endless dry days, a couple of reasonable seasons, media attention on global food shortages, and growing positivity within the agricultural industry, the rural property market has enjoyed a steady 25 per cent growth over the past six years. Delta Agribusiness Rural Property Manager Tim Corcoran travels across southern NSW selling land larger than 50 acres – including cropping grazing, irrigation and lifestyle lots – and is seeing a lot of demand across the coverage area. He says the land values reflect average rainfall patterns, soil types and productivity levels expected within each region over the past three to five years. Areas with lower land values generally equate to farms with lower rainfall, poorer soils and lower DSE so will have offerings of larger sized farms in order to reach the economies of scale required to make them profitable holdings. Likewise, for the more expensive areas, these will generally have higher, more reliable rainfall, better soils, and will be offering viable farms which are smaller in size but more intensively farmed.

 

These core values are based on today’s conditions, so as climatic changes occur or the focus shifts between agricultural practices and opportunities, these values will obviously fluctuate.Tim is seeing a strong and continuing level of growth and interest in farmland, particularly in mixed enterprise farms, which are attracting buyers who are paying a premium for diversity.

 

“This isn’t to say that cropping blocks aren’t good, it’s just that due to the excessive wet and lower grain prices seen in 2016, buyer enthusiasm has definitely steadied since September last year, although overall, prices are expected to remain strong for a while yet,” he says.

“Farms which are enterprise specific, all cropping or all livestock, tend to be of interest to a limited market and usually those who are buying in order to complement an existing business. However, in saying that, most quality places are moving within five to six weeks of coming on to the market,” Tim, who clocks up more than 60,000km in a year on the road meeting clients, says.

With the turnaround in agriculture, sons wanting to get into farming and families wanting to expand to help the next generation make a start, he says it is becoming more and more difficult to find and buy viable parcels.

Tim has observed that the generational farming families are always looking to secure neighbouring properties to expand their scale and in tightly held areas this luxury can sometimes mean patience or, farmers who are prepared to drive some distances to secure scale and rainfall.

As a buyer…

According to Tim, in the Wagga area (where he is based), the median age of buyers is around 50. He says the younger generation are finding it challenging to afford to buy into the rural property market unless they have significant additional backing.

“The 100-acre ‘lifestyle’ blocks with a four-bedroom quality home will move for around $900,000 to $1 million dollars with the market being dominated by professionals seeking a ‘tree change’ for their family,” he says.

Tim’s top tips for buyers in today’s market are:

1. Do your due diligence. It is important when purchasing rural property as a viable business enterprise that buyers know and understand the historical data for that particular farm. Past performance may not necessarily be an indicator of the future but it will certainly answer questions around the upfront inputs which may be required to raise productivity and plan short-term farming strategies.

2. Look for properties needing some repairs and maintenance. Properties which are not well presented will give buyers an opportunity for price negotiation in light of the cost of repairs.

3. Best time to buy is spring.  Predominantly over the spring we see a lot longer list of properties being offered where vendors will showcase their asset in full swing and production levels are evident.

4. Looking for a bargain? There aren’t any bargains out there at the minute. Sitting back and waiting for the market to come back doesn’t seem to be an option as who knows where the market will to go from here.

 

For sellers…

Tim Corcoran recommends that money should be spent on improvements and getting the property “market ready”. It’s the improvements, overall finish and look of a property where sellers can pick up significant premiums over and above the core land values.

For the greatest outcomes, here are Tim’s four top tips:

1. Digital Marketing. This is where sellers are enjoying major savings.  Online marketing is far cheaper than print media and it is far more wide reaching and interactive.  
• Thanks to drones and YouTube style short videos, buyers can really see what a place is like before driving through the farm gate so be sure to have a good short video made with aerials of the house, sheds and infrastructure, paddocks, waterways etc.      
• Online marketing also provides more cost effective access to much larger markets with national sites such as realestate.com.au, domain.com,  domainrural.com and more locally with the statewide Delta Ag website and Canberra’s allhomes.com.  
• There are also benefits to sellers using social media pages such as Facebook, Instagram and Twitter.

2. Presentation is the key.  Buyers will always look to pick a place apart and talk it down, so don’t give them anything to focus on.  You want them to look around and think “I don’t have to fix or improve anything”.
• Be sure the place is exceptionally neat, no scrap metal, old machinery or piles of drums lying about sheds. Spray and mow around sheds as well.
• Make sure all your infrastructure looks well maintained. Paint sheds and doors, fix down loose and curled iron, make sure sheep and cattle yards are weed free and in good working order.
• Be sure all fences are strained, straight and strong.
• Always make sure gates swing freely and properly – a key tip!
    
3. Provide accurate and historical farm data. Places providing rainfall charts, cropping and fertilizer history, soil test results or any other significant historical data helps build confidence in the buyer.

4. Sell when an area looks its best.  Spring is traditionally when things look best and buyers are in a buoyant and fresh frame of mind after shaking off winter. This is also when buyers are most likely to be looking.  The top selling months are late August through to October. Grazing properties have a good body of feed and cropping places can be sold with after harvest settlements.

Tim concludes that because the current market is deep with interested buyers, owners need to be smart about how they present and promote their property, being sure to use all that digital marketing offers. He believes there is no point losing opportunities just for the convenience of selling over the fence.

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