Weekly Property Reports

Weekly property review: Softer market defers listings into 2025

Property editor Linda Rowley October 4, 2024

 

PLENTY of farming and grazing properties are still being listed, but some agencies are concerned the market is softening and are advising vendors to postpone the sale process until 2025.

In this week’s property review, rural sales specialists give an insight into where the property market is headed in the lead up to Christmas.

Meares & Associates principal Chris Meares admits to pushing some listings out of this spring into early next year because the market is looking relatively soft.

“We have suggested to vendors a soft approach this spring, and if the property doesn’t sell, cranking up in autumn 2025.”

Chris Meares

Mr Meares said property markets across the board – with the exception of perhaps industrial – appeared to be under pressure.

“There is concern about the state of the economy and in particular, inflation and the cost of funds. While agricultural commodity prices have picked up, they are nowhere near the highs achieved two years ago.”

“In October 2022, the Eastern Young Cattle Indicator hit 1160c/kg. Last year, it dropped to 354c/kg and has now risen back to around 680c/kg.”

“This summarises what is happening to most commodity prices – beef producers can make money out of 680c/kg, but it is nowhere near as profitable as it was in 2022.”

Mr Meares hopes 2025 will be more positive.

“There is talk about reducing inflationary tendencies in the market, particularly interest rates. In addition, the season has been mostly good and commodity prices stronger.”

He said confidence was key.

“With an election looming, there are many unknowns and people are undecided about whether now is an opportune time to invest.”

“Looking back, in 2022 there was a peak in rural property values which dropped off in 2023, followed by some recovery in 2024. Now, potential investors are questioning what the future holds – will prices plateau or fall, or will they rise?”

Mr Meares said the property market needed confirmation that current values are realistic.

“Many rural properties have been offered to the market, but sale success rates are low. This has also been reflected in other sectors, for example metropolitan residential property prices.”

He said the influence of the carbon offset market on agriculture was a sleeping giant.

“This sector will become more active in time, but interested producers need to be in an area suited to carbon. Interestingly, some carbon operators may find properties located in higher rainfall areas too expensive on an agricultural price per hectare basis.”

Expressions of interest

An agent who spoke to Beef Central who asked not to be named criticised the expressions of interest selling process, saying under current market conditions, buyers don’t know where to pitch with tenders.

“Those bidding on a property worth $10 million or $20 million don’t want to pay too much, but they don’t want to miss out. So, they are asked to put in a tender, but don’t know where to pitch,” he said.

“Today, in an auction environment, interested parties can see where the bidding is up to and decide whether to participate. The same goes for the vendor. If they are unhappy with the price, they pass the property in.”

“The success rate of expressions of interest sales are not high at present and, in some cases, it has cost the client two marketing campaigns.”

“Therefore, EOIs put doubt in the market because interested parties observe a property is listed for sale, see that it fails to sell and is then relisted with a reduced price tag.”

Col Medway, LAWD

LAWD director Col Medway said there was no momentum in the current property market.

Col Medway

“In terms of the components of a deal being done, banking and legal speeds are challenging at the moment,” he said.

Like Meares & Associates, LAWD is actively advising vendors at present to postpone listings until next year, unless they have a deadline or their hand is being forced.

“Agriculture can be counter cyclical to the wider economy at times, but it is not immune to it and there is still a slight hangover from last year.”

Mr Medway identified three major issues that might impact land prices in the fourth quarter.

Commodity prices

“Commodity prices are never all high at the same time however, sheep, cattle and canola prices are presently tracking well, but wheat is soft.”

Seasonal conditions

Mr Medway said there had been a run of good seasons, so conditions could tighten up at some stage.

“If the Bureau of Meteorology gets the forecast wrong two springs in a row, there will be riots in the streets,” he said.

According to the BoM, it is possible a La Niña may develop in coming months but if so, it is predicted to be relatively weak and short-lived.

“If the remainder of 2024 ends up being a tight year, the BoM’s credibility will be under serious threat,” Mr Medway said.

Interest rates

Mr Medway said interest rates may be higher, but they are not high.

“In terms of lower interest rates, be careful what you wish for. The only reason the Reserve Bank will drop interest rates is if the economy starts to tank, and that can be a double-edged sword.”

He said if the property market is at that level of uncertainty, it was understandable why buyers are uncertain, and the default position was not to act.

Brad James, Rabobank

Brad James is Rabobank’s acting state manager for Queensland.

He reports good confidence across the various agricultural sectors, evidenced by the amount of inquiry from clients.

“Transactions are lower in volume compared to last year, with the demand versus the supply equation leaning this year in favour of the purchaser.”

Brad James

Mr James said over the last five years, the market favoured the vendor, because the number of buyers outweighed the number of properties listed for sale.

“For the most part, the peak of the market has moderated because the confidence underpinned by very strong cattle prices has now waned.”

He said in some instances, grazing properties were on the market for extended periods.

“Perhaps vendors have expectations of achieving past prices, which is only natural in any given market that is coming off a peak.”

Mr James said highly productive properties would always attract high levels of interest, whereas neighbouring properties would be the aberrations that attract high interest from locals wanting to expand.

“Those properties will always move, it is just a question of how much of a premium they achieve. In the meantime, other ‘rank and file’ type properties may take longer to sell.”

Cyclical markets

Mr James said all agricultural markets cycled, rather than experiencing the boom and bust of the non ag commercially oriented business investments.

“In 2000, cattle country in Central Queensland was making $1500/beast area. Between 2002 and 2007 (prior to the Global Financial Crisis) land prices exploded to $4000/beast area. This was driven by market confidence and producers wanting to expand.”

Mr James said property prices were steady during the GFC (between mid-2007 and early 2009) and then slowly recovered.

“When cattle prices took off in 2018, land prices for cattle went through the roof. Today, prime cattle country that can finish a bullock is making $15,000 a beast area, driven by commodity prices.”

Mr James said banks saw fair value in the price of agricultural land in Australia compared to peer nations.

“A hectare of land in Australia, based on what it will return, presents good value compared to a hectare of land in the United States or Europe.”

Mr James said at present, cropping properties and mixed farming enterprises were highly desirable.

“In the past, grazing areas led the strength of the property market. More recently, the trend is towards purchasing arable/cultivation land.”

“There is a strong demand from farmers seeking to expand their cultivation areas, largely predicated by strong grain prices.”

He noted some producers were adopting a cautious approach as they waited to see what the season brings.

“Typically, producers want to buy properties with a solid season behind them with a focus on productivity.”

Compared to the southern states, Mr James said there did not appear to be a buying and selling season in Queensland.

“I won’t say that season doesn’t impact property prices and activity. It does, but I don’t think it is the pre-determiner for that, unless a producer is in the middle of a drought and someone has a green paddock. That’s a different set of circumstances driven by a need and can impact price.”

Mr James said nothing pointed to a big shift in values in the final quarter of 2024, even if the season breaks.

“Driving south through the northern and central Burnett recently, there were few green paddocks but the cattle were in good condition. So, the season has been solid and in line with typical conditions seen at the end of winter and beginning of spring.”

Input cost relief

One of the positive impacts in the current property market, according to Mr James, was moderation of input costs.

“Inputs, particularly fertiliser, have returned to slightly more sensible levels and that has helped confidence.”

Despite lower transactions, Mr James said banking inquiry was still strong.

“There hasn’t been a decline in the number of people seeking finance to expand. It may not be at the level it was three years ago and is down by around 10 percent.”

He said fewer buyers were walking away from auctions disappointed compared to three years ago, when a greater percentage of prospective buyers were unsuccessful.

When it comes to acquiring land and expanding, Mr James said producers are conducting more analysis than ever before.

“In the past, bankers had to encourage clients to undertake forecasting and constructed cash flows. Today, most clients are presenting banks with a detailed analysis on the financial viability of their purchases or expansion.”

Mr James also noted that impairments or default loan rates are very low across the board, which is of comfort to all parties.

“There is significant due diligence being conducted by purchasers to ensure the investment is viable and on top of that, banks also naturally undertake financial analysis to determine a producer’s ability to take on further gearing.”

He said generational wealth was also impacting property values.

“Now, more than ever, succession is a topic of discussion among family members and this is encouraged from our point of view.”

“Through our client councils, Rabobank facilitates succession planning workshops to ensure this important subject remains on the table.”

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