Drought impact on Central and Southern NSW property market has been limited: HTW rural
The weather has played an interesting part in the property matrix over the past 18 months, according to the latest Herron Todd White (HTW) rural report.
The valuation firm took a look at the property sales in drought-affected regions across the country.
"Generally when we have seen depleted cash flows through lack of feed, eventually there has been a corresponding drop in market interest due to the inability to service any expansionary ideas," the valuation firm said.
"Up until recently, from our perspective, it has not had the greatest impact on the general property market however over the past eight weeks we have begun to see decisions made on farm that have been prompted by the lack of cash flow and debt servicing ability.
"While this has had some softening effect on the level of interest within the general market place there is still solid market participation at auctions and marketing campaigns, albeit at a lower level than previously experienced."
The report notes this drought impact is not as evident in the corporate sector as a majority of these purchases are undertaken with funds under management and not borrowings.
"In fact we are seeing an increase in activity of smaller corporate players at present, particularly in central New South Wales around the Forbes district where a number of the smaller entities have been active searching for properties in the $3 million to $7 million range," said the report.
"We are aware of a transaction under contract at present in central New South Wales which does involve one of the smaller corporate entities mentioned which has been purchased on a sale and lease back agreement.
"The lease equates to a 4% return on initial investment. This would be reflective of the general market now in terms of yields with most tenanted properties in the 3.5-4% range.
"This is a reflection of the substantial increase in underlying land value which has resulted in compression of yields as tenants are unwilling and unable to afford the previously accepted yield range of 4.5-5%."
A recent sale in the Riverina which has just settled is the property called The Peak.
This property was put out for tender rather than auction and received significant interest from local landholders and nearby landholders looking to expand.
This is a 659 hectare property subdivided to five main paddocks and improved with a basic machinery shed and silo. Soils are good quality red loams typical of the area.
The property is located 25 kilometres north- east of Barellan and 25 kilometres south-east of Weethalle.
It has now settled and indicates an overall improved value of $3,188 per hectare which equates to approximately $1,290 per acre.
This is a particularly strong sale and would be considered to be setting new benchmark levels for the area to the south of Weethalle, HTW said.
"When we look at the property clock of an area, knowing when we have hit the top of the market is always a retrospective analysis," said the report.
"In other words, we will only know we have hit the top of the market after we have passed it.
"We have previously reported the sale of Forest Vale (pictured below) in the southern Riverina area around Holbrook and Gundagai."
This is a 1,165 hectare open grazing property in a well-regarded location on the Hume Highway and the sale included substantial improvements including a fully renovated circa 1902 homestead.
The reported purchase price of the land was $13.25 million which equates to $11,373 per hectare overall.
"Whilst this appears only marginally in front of other smaller area sales in terms of achieved dollar per hectare rates, it is not until we know the details of the balance of the contract that we will be able to accurately assess the real price paid for the land itself.
"However after consideration of the reported price and the scale of the property involved, I believe we will look back at this sale and call it the peak of the market for this area.
"Mind you, only time will tell."