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Rural property prices in New South Wales have hit "extraordinary" highs this year as farming families strengthen their property portfolios.
Key points:
- Rising interest rates aren't impacting rural property sales
- Family farming operations are increasing their holdings
- Agents say farmland prices peaked in 2022 and will settle in 2023
It comes despite pain rising interest rates have inflicted on the residential market.
Meares and Associates director Chris Meares said the ingredients for rural investment — favourable seasonal conditions, high commodity prices, low cost of funds, and the balance of supply and demand — were aligned and positive.
"Overall 2022 has been an extraordinary year … we have seen farm prices reach historical highs, and that pattern has continued throughout the year," he said.
Rural property agent David Nolan, who has offices in Gundagai and Sydney, said the market had been very strong this year and interest rates had not had a bearing on farmland sales like they had on residential home owners.
"There's plenty of cash and whether that's borrowed cash or saved cash in reserve, I think there is plenty of money about and farmers have become very business orientated," Mr Nolan said.
"People are aware of them and treat them like they should be treated.
"But I don't think these rates at the moment are going to cause any troubles and I think they are pretty manageable."
Mr Meares agreed that interest rates were not affecting property demand.
"At the moment farm incomes and farm returns are high and well and truly covering the cost of funds," he said.
Family farmers buy in
Mr Nolan said buyers were changing.
"The demand for grazing operations is being driven by the next generation coming back to the land, because it's worthwhile coming back, the agricultural sector is very strong and the future looks very bright," he said.
"It's a completely different scenario to 10 to 20 years ago when children were being encouraged to go to uni and not bother coming back to the farm."
Mr Meares said existing farmers accounted for about 95 per cent of rural property sales as more corporates had exited.
Mr Nolan agreed corporates were going out of the market as "they had ridden the capital growth game".
"Whoever got them onto that are pretty smart because they've enjoyed great success, but I don't think they'll keep going because the returns won't justify the fees being charged by the fund managers," Mr Nolan said.
"I think the family farm will become once again the backbone of Australian agriculture."
Farmers compete for neighbour's farm
Mr Nolan said he sold Riverina property Wandeen at Gundagai earlier this month for $28 million at auction.
The 2,056 hectare grazing property, which was owned by George and Geoff Nicholls, is home to about 400 shorthorn cattle and 6,000 merino ewes.
Mr Nolan fielded 100 inquiries for the property and conducted 16 inspections.
"When it went to auction in Sydney, two [Gundagai] locals locked horns and we saw it go from $24 million to $28 million."
The well-equipped property featured three residences, three sets of steel cattle yards, a shearing shed with steel sheep yards, four sets of steel sheep yards, a machinery shed, a hay shed and six silos.
In contrast, Mr Nolan also sold 907 hectare property Bunnabukbuk at Adelong on the NSW South West Slopes for $13.2 million.
"Bunnabukbuk was basically bare with a set of basic cattle yards and basic shearing shed," Mr Nolan said.
He said there was also a trend of people expanding their property portfolio into other regions.
The property was bought by merino sheep and angus breeders Jim and Libby Litchfield, who also have holdings at Cooma and Hay.
New year, steady market
Mr Nolan expected the rural property market in NSW to be strong in 2023.
"I think it has plateaued, it will be a good market to be selling into it and I think it will be a fair market if you're buying," he said.
Mr Meares also anticipated a slight softening in the market including broadacre and lifestyle agriculture.
"You might see a softening of up to 10 per cent or something like that," Mr Meares said.
However, it's expected farmers will drive the market again in 2023, according to the most recent Rabobank Rural Confidence survey.
"57 per cent of farmers interviewed believe that the returns in 2023 will exceed those 2022 — and that just reeks of the confidence in the sector," Mr Meares said.