Kelly
17-03-2011, 08:09 AM
Robust commodity prices are expected to put upward pressure on land and water values in rural NSW, but it's likely to be 2012 or even 2013 before prices actually edge higher.
According to consultants with national property advisors, Herron Todd White (HWT), there will be a time lag of two to three years before improved returns are reflected in strengthening property prices.
That's partly because of the need for farmers to financially consolidate and reduce borrowings before they embark on further expansion, and partly because the market is still weighed down by an overhang of unsold properties.
Speaking at HTW's annual industry briefing on rural property markets in Sydney last week, Dubbo based consultant, David Sullivan, said values had largely “stagnated” as sales activity had slowed.
Vendors' price expectations in many cases were still high, while buyers today were looking at potential return on equity when assessing a property, and returns often failed to justify the prices being asked.
Analysis by HTW of rural property data up to 2010 indicates NSW rural land in the past 10 years has shown an average annual capital growth of 9.7 per cent.
Northern NSW has been the best performer, at 13.2pc, followed by central/western NSW at 9.1pc and southern NSW at 8.4pc.
Analysed by property type, the growth rates were highest for wheat/sheep farms (10.4pc), followed by high rainfall (7.9pc) and pastoral properties (5.6pc).
Mr Sullivan said it would not be until family farm operators returned to the market that property prices would come under upward pressure.
In the meantime, attractive opportunities would be available for any cashed up buyers, as firming commodity prices fed into improved rates of return on static property prices.
A factor militating against grazing property sales today, especially for new players, was the high cost of stocking a property with sheep or cattle at present record prices.
In some regions, the cost of stocking with sheep on present day values could easily add a further 25 to 30pc to the land purchase price.
Other factors influencing the market were the rundown in on farm infrastructure that had occurred during the drought years, and the tightening up by banks on all business lending.
In high rainfall areas, sales activity and values had both taken a hit from the virtual disappearance of city based lifestyle property buyers from the market since 2008.
Sales in the wheat/sheep zone had seen slight value increases posted in some areas, while in others the market had all but shut down.
Premiums had been paid in places for cropping farms with a history of minimum tillage and controlled traffic farming, but in marginal cropping areas demand as a whole had slowed.
Foreign investment vehicles are expected to dominate the corporate buying activity in 2011, following an estimated $300 million worth of offshore purchases Australia wide in 2010.
Of that $300m figure, however, Mr Gardiner said an estimated 75 per cent involved properties already in foreign ownership, all that had changed was the foreign owner's identity.
According to consultants with national property advisors, Herron Todd White (HWT), there will be a time lag of two to three years before improved returns are reflected in strengthening property prices.
That's partly because of the need for farmers to financially consolidate and reduce borrowings before they embark on further expansion, and partly because the market is still weighed down by an overhang of unsold properties.
Speaking at HTW's annual industry briefing on rural property markets in Sydney last week, Dubbo based consultant, David Sullivan, said values had largely “stagnated” as sales activity had slowed.
Vendors' price expectations in many cases were still high, while buyers today were looking at potential return on equity when assessing a property, and returns often failed to justify the prices being asked.
Analysis by HTW of rural property data up to 2010 indicates NSW rural land in the past 10 years has shown an average annual capital growth of 9.7 per cent.
Northern NSW has been the best performer, at 13.2pc, followed by central/western NSW at 9.1pc and southern NSW at 8.4pc.
Analysed by property type, the growth rates were highest for wheat/sheep farms (10.4pc), followed by high rainfall (7.9pc) and pastoral properties (5.6pc).
Mr Sullivan said it would not be until family farm operators returned to the market that property prices would come under upward pressure.
In the meantime, attractive opportunities would be available for any cashed up buyers, as firming commodity prices fed into improved rates of return on static property prices.
A factor militating against grazing property sales today, especially for new players, was the high cost of stocking a property with sheep or cattle at present record prices.
In some regions, the cost of stocking with sheep on present day values could easily add a further 25 to 30pc to the land purchase price.
Other factors influencing the market were the rundown in on farm infrastructure that had occurred during the drought years, and the tightening up by banks on all business lending.
In high rainfall areas, sales activity and values had both taken a hit from the virtual disappearance of city based lifestyle property buyers from the market since 2008.
Sales in the wheat/sheep zone had seen slight value increases posted in some areas, while in others the market had all but shut down.
Premiums had been paid in places for cropping farms with a history of minimum tillage and controlled traffic farming, but in marginal cropping areas demand as a whole had slowed.
Foreign investment vehicles are expected to dominate the corporate buying activity in 2011, following an estimated $300 million worth of offshore purchases Australia wide in 2010.
Of that $300m figure, however, Mr Gardiner said an estimated 75 per cent involved properties already in foreign ownership, all that had changed was the foreign owner's identity.