Rural auctions set to cool as buyer pool shrinks
A thinning of the buyer pool, fewer on-farm inspections of properties, and a focus on “return metrics” as interest rates rise point to rural auctions coming off the boil and farmland price growth moderating, rural agents and valuers say.
While sought-after properties continue to command a premium – an example being the 325-hectare former Arding CSIRO station at Armidale owned by well-known businessman John Cassidy, which Daniel McCulloch from McCulloch Agencies sold for $8.2 million to premium beef producer Jackson Agriculture – veteran Ray White Rural NSW agent Bruce Birch said it felt like the market was “wanting to level out”.
“We’ve had four auctions in two weeks, and they have all sold above reserve, so the market remains stable,” Mr Birch said.
But Mr Birch, who along with Ray White colleague Andrew Starr sold 402-hectare Mount Emby at Ben Lomond in the NSW Northern Tablelands for $7.9 million to feedlot and nutrient consultants Matthew and Melissa George of Bovine Dynamics, said there were probably fewer inspections than 12 months ago.
“So potentially the dreamers have exited market and only those running around [looking to buy] are serious cash buyers” Mr Birch told The Australian Financial Review.
“There has been no easing of value on the pricing we have seen, but it feels as if the market is wanting to level out. The buyer pool is not as deep,”
A moderation of the market was also noted by rural valuers at Herron Todd White.
Writing in the firm’s October Month in Review report, NSW valuer Andrew Garnsey said early reports from agents in the state’s central and southern regions was that “value levels are plateauing at last, with purchasers running the numbers on acquisitions with potential interest rate increasesin mind”.
“They are increasingly making purchasing decisions based on return metrics rather than a fear of missing out, which has largely driven price gains over the past 18 months or so,” Mr Garnsey said.
“Buyers are being advised to consider their overall equity positions as holding debt has become almost twice as expensive as it was just a few months ago and further increases are likely to occur.”
Mr Garnsey said the overwhelming sentiment being communicated by buyers was that “we have reached the end of the current capital gain cycle, and it may be many years before we see another upswing in values and corresponding increases in equity”.
“That said, we don’t expect a major correction in values any time soon given the positive seasonal outlook (a third La Niña on the way) and continuing historically high prices across most rural commodities, particularly grains and livestock.”
