Australian farm prices: Experts reporting greater caution from buyers

A difference in vendor expectations and buyer purchasing power is increasing as more caution creeps into the rural property market.

The difference between vendor and buyer expectations is widening as a wave of caution enters Australia’s rural property market.

Herron Todd White Victoria and Tasmania agribusiness director John Gunthorpe said there were warning signs the market was feeling the pressure of rising interest rates and softening commodity prices.

“I think what is really interesting is that the gap between vendor expectations and buyer capacity is widening,” Mr Gunthorpe told the 2023 HTW rural property update in Melbourne.

“So what we mean by that is the market has grown so strong over the last two, three years that even though vendors on the 10-year long-term average are massively up, maybe 500 per cent in some places, they haven’t adjusted their expectations on where buyer capacity is starting to diminishing on the back of interest rates and other headwinds.

“So there may be a difference between these expectations and this will need to be addressed if transactions are to be completed going forward.”

In its rural market update, HTW found farmland values in some regions had soared by 500 per cent or more since 2011, with prices climbing from about $4000 a hectare in Victoria’s Western District to $20,000 a hectare.

But Mr Gunthorpe said buyers were now showing more caution when considering purchasing property due to increased economic headwinds.

The 362ha Runaroo farm at Poolaijelo was passed in at auction last month.

“We are seeing those canaries in the coal mine around agents having to work a bit harder to get properties away and generally look to see a softening in the market,” Mr Gunthorpe said.

“We are seeing a level of caution in the market as people are taking a step back, taking a breath and thinking a bit longer before making investment decisions.

“We are especially seeing that in farms where there is a lifestyle element or where the property might not be a viable concern in its own right.”

This was evident in February when two historic Western Victorian farms, the 478ha Majors Creek farm at Wando Bridge and a 706ha cropping aggregation at Nhill, failed to sell at auction.

Meanwhile, Elders Real Estate farmland agency and agribusiness investments general manager Mark Barber said he expected rural property prices to plateau in 2023.

“I think that property prices have priced in seasonal, commodity prices (longer term outlooks) and interest rates. So unless there is a significant change in one of these I expect prices to remain stable,” he said.