Low interest rates, strong livestock and commodity prices drive land values in NSW
Despite below average rainfall and extremely dry seasonal conditions, the land value of several properties exchanged last year exceeded price expectations across several regions of the state.
International and institutional investor enquiry was also very prevalent in the marketplace, particularly for large scale assets.
Colliers International found that rural land values in both high rainfall grazing areas and reliable cropping regions of New South Wales strengthened in 2018 and based on current demand and confidence, will continue to grow in 2019.
“We have identified a significant upward trend in land values across several areas of New South Wales with some regions up 30% to 50% on average, in comparison to where values were in 2015-16,” said John Harrison, Associate Director of Agribusiness Valuations, at Colliers International in Sydney.
“It is clear that low interest rates, a lack of listings and strong livestock & wool commodity prices are primarily driving the surge in land values, igniting strong demand from existing farming entities looking to expand or diversify their portfolios.”
Mike Clifton, Director of Transaction Service for Colliers International Agribusiness, said “Colliers International conducted several significant sales in 2018 which demonstrate strong land values.”
“These included 16,554 acres of premium quality mixed farming at New Merrigal in Collie for $16.3 million; Diverse cattle breeding in Glendon Park, Armidale (7996 acres) for $14 million; and the sale of Truro Cootamundra - 2360 acres of premium mixed farming – for $8.32 million.”
“Evidently, the uplift in land values came on the back of strong returns from livestock, with sheep and prime lamb producers currently enjoying fantastic returns along with strong wool prices.”
Recent sales in the western areas of NSW have revealed dry sheep equivalent (DSE) rates ranging between $400 and $600, whilst high rainfall grazing areas are seeing DSE values ranging from $600 to $800.
There has also been strong demand for large scale dryland and irrigated cropping assets, which have primarily attracted interest from institutional and corporate grade investors.
“We would expect values to remain firm for these assets on the back of continued strong enquiry from both local and offshore investors,” Mr Harrison said.
Throughout 2018 and into 2019, the water market has become a key talking point, with water entitlements thinly traded in NSW and experiencing strong demand with the majority of recent trades comprising smaller parcels. Commodity prices for fodder, nuts, table grapes, citrus and almonds are currently positive compared to previous years.
“As a result of the current high values for water, summer crop planting programs are generally well down on historical averages with the high cost of water making irrigators reassess their margins” said Mr Harrison.