Victoria, NSW, SA: What’s driving farmland prices this spring?

Two key factors are affecting current farmland values, as the market faces lower commodity prices and drier than average seasonal conditions.

Buyer sentiment and the quality of agricultural assets are proving to be two crucial factors determining demand for rural property, in a market facing lower commodity prices, drier than average seasonal conditions and a higher cost of borrowing.

A “reasonable” supply of farms have hit the market in recent weeks as part of what is the traditional spring selling season, with Herron Todd White director Angus Ross expecting well-established farming families to be the primary potential buyers.

“There has been a noticeable and increasing trend across most agricultural areas in New South Wales of motivated primary producers (and agribusiness-related land holders) to buy adjoining properties and spend significant funds on them,” Mr Ross said.

“Sales activity in the Central West and Central Tablelands New South Wales rural market appears to have slowed in recent months.

“This may suggest there is continued easing in buyer interest which may lead to a softening in values.

“We see a reasonable volume of properties listed for upcoming sale by expressions of interest or auction in September and October including in Forbes and Corinella.”

Farmland values are under the microscope this spring. Picture: Zoe Phillips

Meanwhile in Victoria’s west and in southeast South Australia demand at the higher end of the market remains, indicated by the multimillion sale of the Merrett family’s farms, situated near Serviceton.

Owned by the Merrett family for two generations, four cropping properties totalling 550ha were offered for sale via auction last month, where they were each sold post-auction to separate local buyers.

It is understood the blocks were sold for individual prices ranging from at least $22,238 to more than $24,709 a hectare (low-$9000s to low-$10,000s an acre).

As a whole it is understood the aggregation, which comprises lots sized from about 200ha down to 80ha, was sold for a figure well in excess of $12.2 million.

Westech Real Estate Nhill selling agent Stuart Kyle, who handled the sale of the three Victorian parcels, said there was considerable interest in the Merrett farms, even though they were priced at the higher end of the market.

“The interest in the farms was good, but we had another level of interest that was priced just under where we were sitting,” Mr Kyle said.

“There were several bids on the day, but there were a number of people there who were interested but didn’t bid.

Four cropping farms near Serviceton sold post-auction last month. Picture: Supplied

“The sales were a very solid result. I would say the sale prices were down about 5-10 per cent compared to what we might have achieved 12 to 18 months ago.”

HTW director Shane Noonan said these softer farmland prices had been seen across the border into South Australia too.

“The past six to nine months have seen some stability and slight softening of values within the southeast and cropping regions of South Australia with many market participants considering that land values have now passed their peak for the time being,” he said.

“The market is still characterised by little supply, which is similar to the market over the previous 24 to 36 months, however the heat has come off with more of a cautious approach now being applied by buyers, which was not evident leading into and post-Covid market conditions.

“During this period there appeared to be multiple buyers chasing a particular asset whereas now agents are reporting this demand is more likely to be from one to three participants.

“While sentiment might now be lower, anecdotal information suggests many farming families have very strong balance sheets and some of these families have most likely been waiting for values to ease before entering the market.

“This group will likely focus on higher grade assets. Secondary grade properties or properties in more marginal areas are receiving less interest and could expect to sit on the market for a longer period of time and even soften in value.”