Mildura rural market to remain bouyant in 2018
It is hard to see any reasons for the current buoyant Mildura rural property market not to continue throughout 2018, according to HTW valuer Graeme Whyte.
"The current property cycle is remarkable for the fact that virtually all local commodities are enjoying above average returns, with the outlook for most commodity prices currently being very favourable," the recent update advised.
"At the same time, there is a large pool of corporate buyers targeting Australian agriculture," added.
Buyers are actively chasing most types of horticultural property as well as cropping and grazing enterprises and appear prepared to pay historically high prices for properties that provide good economies of scale and have a good standard of improvements.
There also continues to be large scale green field development of almonds, olives, table grapes, citrus and to a lesser extent dried fruit, however the pool of available land for such development is getting smaller.
The valuation firm noted the foundations for the current good export returns for commodities such as citrus, table grapes and almonds date back to many years of patient market development combined with the signing of free trade agreements with key Asian countries.
The ability of growers and marketers to ensure all market protocols are met will be the key to maintaining these lucrative markets.
"Maintaining a competitive exchange rate will also be important."
The other main factor affecting the horticultural sector will be the irrigation water outlook, Whyte advised.
"There was above average winter rainfall (and snow fall) during 2016 and 2017, which contributed to high allocations in the Murray Valley and readily available temporary water on the leasing market.
"The cost of leasing water has been mostly below $130 per megalitre for the past 18 months.
"Forecasting future rainfall is beyond my brief, however history suggests that there will be a drier winter during one of the next few years and that at some stage, irrigators will have to face the prospect of paying more for temporary water."
One of the more noteworthy recent sales is of Petro Station, which is a large scale cropping and grazing property located in south-western New South Wales, approximately 60 kilometres north of Mildura.
This property, held under NSW Western Lands lease, included approximately 8,400 hectares of good standard cropping country.
The $11.8 million sale was advised with the land transfer at $9 million. It was bought by GoFarm Australia which snared one of Victoria's biggest parcels of water with its purchase of Del Rios for around $22 million in 2016. The 900ha vineyard, north of Swan Hill and near the junction of the Murray and Murrumbidgee rivers at Kenley, was sold along with its 5476 megalitres of high-security water.
HTW advised the Petro sale shows over $900 per hectare for well regarded arable land, but located in an area with an average rainfall of around 300 millimetres.
It was offered for the first time in 73 years by the Doyle family.
The property is 26,685 hectares of which 9000 hectares is of cropping country with sandy loam soil type and solid cropping history and average rainfall 302.5 mm and 17,500 hectares approximately of grazing land with some 800 dorpers and 90 per cent fully fenced.
The property has a further 200 hectares cropping license undeveloped, and the balance of land consists of pristine Mallee scrub and locked up conservation in conjunction with Dept of Infrastructure and Natural Resources .
Petro has a permanent 21 megalitre water entitlement with private diversion from the Darling river via a 32 km, 2 inch line.
Meanwhile, the purchaser of this property sold an 1,130 hectare parcel of mostly arable land adjoining the Robinvale irrigation district for approximately $4,500 per hectare, which showed a healthy 240% capital gain in the three years they owned it.
The purchaser of the Robinvale property is an established table grape growing family, who intends to complete a large scale horticultural development.
"This last sale highlights how quickly market sentiment in the horticultural sector can shift."
Some of the trends HTW expect to see during 2018 include:
• A large number of sales continuing to be negotiated in off market transactions, with both buyers and sellers willing to by-pass real estate agents. In most cases, buyers are directly approaching owners of properties deemed to suit their requirements.
• The price gap between highly improved and just average standard properties will narrow. It will get harder to find highly improved properties and buyers will likely become more pragmatic as a result.
• There will continue to be sales of winegrape vineyards where the purchaser intends to redevelop to a higher returning crop.
• As the market moves through the current cycle, there will be some properties purchased for prices that are subsequently viewed as being at above market levels.