FIRE sales and bargains will dominate the rural property market this year as pressure builds to sell trophy farms and prized commercial operations.
Farmers with conservative balance sheets will find themselves in the box seat with an opportunity to pick up discounts on non-distressed rural property at prices similar to distressed levels, The Australian Financial Review reports.
A report by insolvency firm PPB Advisory has indicated that the price differential between distressed and non-distressed farming properties is minuscule. PPB found that receivership sales over the past 12 months were able to achieve 93 per cent of the total independent market valuation.
"This shows that there is no significant difference between a receiver's sale and a normal vendor sale of rural property in the current market," said PPB agribusiness partner Greg Quinn.
But Mr Quinn expects more pressure on values this year. "We are concerned that there is further room for downward movement," he said.
"There has already been a significant volume of rural property on the market, which has resulted in values in some regions falling by 20 per cent and as much as 30 per cent."
Many in the industry expect greater volumes of receiver stock in the $1 million to $10 million price range to hit the market this year.
Charlie Blomfield of Agricultural Management Company, who provides management and advisory services to banks and receivers, said 2012 had been his busiest year on record and, depending on global credit conditions, 2013 could be even busier.
"Australian banks seeking offshore funding could see higher borrowing costs and may look to reduce exposure to troubled debts. This could lead to more banks crystalising losses through 2013 and 2014," Mr Blomfield said.
"Domestic banks seem to be reaching a point where the requirement to reduce exposure to poor quality loans and the cost to maintain them exceeds the time required for a work-out plan."
Ernst & Young's Justin Walsh agreed more agricultural properties would come onto the market.
"There is a level of concern from some financiers around agriculture which is not dissimilar to the concerns many of them had around real estate before the meltdown in the global financial crisis," he said.
"Rural properties experienced the same dramatic price increase largely fuelled by debt."
The distress in the rural market is not specific to a particular geography or sector but to those properties where there is financial pressure.
Kingower, a well-known family-owned cotton farming property in Emerald, Queensland, has just sold for about $5 million in a deal brokered by Bruce Douglas and Russell Wolff of of Ray White Rural.
The 3300-hectare property, which was in the hands of receivers Ernst & Young, was bought during the boom for more than $10 million.
While commercial farms are taking a hit, discounting has also spread to lifestyle rural properties, even when there is no distinct financial pressure.
The 115-hectare Normanby Homestead, less than an hour's drive from Brisbane, sold for $1.6 million a few days before Christmas.
The property, including a beautiful five-bedroom renovated homestead with ornate fretwork and 3.6-metre high ceilings was being marketed for $3 million. It has two dams and a 70 megalitre water licence. It was not in receivership.
Ray White's Barry Quinn, who sold the property, said while the pricing was soft, there had been 140 enquiries and 80 official inspections.
The next big trophy farm likely to come onto the market is "Jondell" – a distressed 158-hectare macadamia farm with a palatial five-bedroom, four-bathroom residence in the Noosa hinterland.
The property is in the hands of receivers McGrath Nicol and market sources expect it to fetch about $5 million.