Tight market to continue in 2022

By Belinda Hickman
January 16 2022 - 11:00pm
In a sign of the times, Nutrien Harcourts WA sales representative Adam Shields sold the 626.3 hectare Rosalie Grazing Co at Lower Chitering well above the asking price of $7 million late last year. Agents see a tight market, with low rates of farmland coming onto market, and high demand from cashed-up and motivated buyers as being the stand-out features of the rural real estate market for 2022.

A TIGHT farmland market will likely persist in 2022, agents have warned, though plenty of cashed-up buyers will resume their search for more land in the next few months as harvest winds-up.

Across the real estate sector, from metropolitan residential, to commercial and farmland properties, owners have been holding on due to the limited supply in the market available to purchase or lease - and this situation looks set to continue through the new year.

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Elders senior real estate executive Simon Cheetham said although farmers had mixed results across the State last year, overall it was a phenomenal year for most grain and livestock producers, with a large number going into 2022 in their best ever financial positions and looking to increase their landholdings.

"Now people have gotten harvest out of the way, they are again focussing on buying more land,'' Mr Cheetham said.

"Many growers have been able to capitalise on high yields and strong grain and red meat pricing during 2021 and, whilst enjoying strong equity positions from increasing land values, they will continue to seek expansion opportunities.

"I believe there will be a large number of transactions continuing into 2022, albeit with limited supply."

Nutrien Harcourts WA principal director Terry Norrish said as higher farm input prices were absorbed in the new year, farmers would start to look to expand.

"Given that there appears to be a lot of capital still in the market place to be invested back into agricultural land, WA rural land prices should either plateau or move slightly higher,'' Mr Norrish said.

"Input prices have stunned a few, but once that is absorbed, the need for land will most likely take effect and farm business will look for those opportunities that will start to appear.

"With a lack of supply, and with some businesses realising that it is an impossible task to buy the right place to expand, we may see some properties come up for sale to take advantage of this very heated market."

Ray White Rural WA director Hugh Ness said he expected the trends of tight supply and increasing prices to continue in 2022.

"I don't think a lot is going to change,'' Mr Ness said.

"Demand will be as strong as it was, it is just whether they can find it to buy it and whether they are prepared to accept the value that they will have to pay for it."

Statistics show Australian farmland prices at their highest ever levels, with a Rural Bank report showing the national median price per hectare was close to $6000 in 2020 - a rate of increase steeper than the last price peak up to 2008.

"Particularly in 2007/08, we saw a fairly sharp increase in prices and that was probably also because of limited availability and people were looking to expand,'' Mr Cheetham said.

"That didn't last forever and prices corrected in the following years.''

Mr Cheetham said he thought farmland prices would continue to hold up in 2022, with farmland continuing to be one of the favoured asset classes globally.

"You probably need a catalyst too, such as an incredibly bad season or a really sharp increase in interest rates to see a decline in the current prices,'' he said.

Agents said despite the upward trajectory, prices for WA farmland remained lower than comparable properties in similar rainfall zones and with similar soil profiles in the Eastern States.

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"We are still some way short of where they are in the Eastern States on prices,'' Mr Ness said.

"We have historically been lower, because of the vagaries of population and they do get a price buffer because of that.

"But the differential is still quite extreme in places... there is nothing to say WA prices won't go further.''

Agents said price growth was being seen in almost all areas of WA, not just the coveted medium to high rainfall cropping and grazing zones, but also the larger properties in the lower rainfall areas of the northern and eastern Wheatbelt and smaller lifestyle properties in some of the most desirable parts of WA.

Nutrien Harcourts WA selling agent Adam Shields, who specialises in the shires of Gingin, Chittering, Wanneroo and Swan, said he had experienced unprecedented demand for properties ranging from 10 hectares to 40ha, just north of Perth, which could be used as lifestyle green-changes or small cattle or horticulture operations.

"There is such a high demand that supply is going to be tight, there is a lot of competition for any property that is going on the market,'' Mr Shields said.

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"We are selling properties quite quickly, often before they even hit the market.

"I can't see that changing.''

Mr Shields said multiple buyers were competing for properties and were prepared to "fight for it'' by offering above-market value.

As an example, he recently advertised the 600ha Rosalie Grazing Co property for sale in Lower Chittering asking for offers of $7 million, which he said was sold "for quite a bit more than the asking price'' amid competition from multiple buyers.

As a result of the increased buyer demand, agents said syndicates, which have emerged as a successful buying option in the past few years, were likely to become more crucial in 2022.

Availability will be a key limiting factor in 2020.

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Mr Ness said he expected the tight market conditions wouldn't change.

"It's been tight every year for about 10 years,'' Mr Ness said.

"A lot of that is because corporate buyers have soaked up the larger properties that have come onto the market and if they eventually come back onto the market, such as the Lawson aggregation, they are invariable bought by another corporate player."

Mr Ness said the corporate model has also been adopted by a handful of WA individual investors, who have accumulated land to lease back to farmers.

Farmer retirements always provide properties for sale and some agents suggested that the higher farmland prices may encourage more farmers from this group to exit the industry this year - though opinion was divided on the likelihood of this pool growing in 2022.

"A lot of farmers have had sons and daughters return home, so there ais lready a succession plan in place,'' Mr Cheetham said.

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"If the older farmers retire, there is often a desire to hand it on the the next generation, rather than sell it.

"So I don't think there will be a lot more land available, more of a trickle than a flood.''

Mr Norrish said as farmers looked at their buying options in the remaining part of the selling season and further into the new year, well-managed properties would be most coveted.

"Top of their shopping list will be extremely well managed properties which will attract premium value,'' Mr Norrish said.

"If you are looking for advice to sell, it would be to ensure you are seen as a premium property as you will be rewarded for any money you spend to upgrade your farm.''

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