Optimistic outlook as the WA farmland sales season begins | Weekly farm
THE 2021 selling season has started for the rural Western Australian real estate market and it looks to be another bullish year, with high land prices expected to continue.
Rural Bank’s mid-year outlook report said Australian farmland values had shown resilience during the worst pandemic in living memory.
“While economic volatility has had a significant impact on other sectors, the long-term outlook continues to point to growth in Australian agricultural productivity and profitability,” the report said.
“Several key fundamentals of 2020 remain in play in 2021.
“Low interest rates, high commodity prices, growth in the existing balance sheet, favorable seasonal conditions and tight supply will continue to support the value of farmland in the second half of 2021.”
Nutrien Harcourts WA sales manager Terry Norrish was optimistic about this sales season.
“There is massive confidence in the rural market and the farm business is facing the rare situation where the season has exceptional potential and commodity prices are practically at record highs,” Norrish said.
“Sentiment would be highest as a seller, as buyers and agents look for properties to buy and, in the agent’s case, a market to sell.”
Mr. Norrish expected all types of rural properties to experience increased growth in sales or values ”given the current market environment and the potential the season is seeing.”
“The value of land can only go one way, which is on the rise, given the excellent condition of the season and the markets,” he said.
“There is a lot of money waiting for the right piece of land to be available and when it does, there will be significant competition. “
Simon Cheetham, senior rural real estate executive at Elders, said confidence was high among buyers, sellers and agents.
“Some sellers are watching the market and have decided that now is the time to sell their farm this year with many potential buyers waiting behind the scenes,” Mr Cheetham said.
“Our agents are enthusiastically listing farms across the state knowing they will receive a lot of interest and demand once they hit the market.
“However, this is definitely still a ‘seller’s market’ with only limited properties available in many areas.
“Buyer demands have increased significantly in recent weeks, mainly from local family farmers wanting to know what land might become available.”
Mr Cheetham expected that at the end of this season further growth in land prices was likely.
“Areas where growers have been able to take advantage of a wet growing season and high raw material prices will certainly be interesting to watch,” he said.
“The port areas of Esperance and Geraldton appeared to have seen the biggest increase in agricultural land values in 2020 and are expected to remain strong given current demand and conditions.
“However, the largest percentage increases could be found in other areas that may have been understated by comparison.
“For example, the coastal strip between Guilderton and Greenhead has real growth potential as producers really push production by better managing the soils of the sandy plains.
“Some of our low rainfall areas also have the potential for a high percentage increase in land values if certain yield projections are met and some high rainfall grazing districts have not experienced the same recent price growth. than other areas, making them appear as ‘reasonable value’ compared to other districts. “
In previous years, family farmers have been the main buying group in the market and Mr. Norrish expected this to continue.
“I think local family farmers are in a strong position as they can buy smaller units if they get there locally,” he said.
“Banks are very supportive of well-managed agricultural units with good equity in their business.
“Large investors need large companies that are seldom for sale, so they need to start assessing the value of a potential purchase and whether it is beyond their investment parameters.”
Mr Cheetham expressed similar thoughts, saying family farmers “will continue to aggressively seek to expand both close to their existing farms, as well as to establish ‘bases’ further”.
The challenges facing the market this season are expected to be similar to those in previous years, with Mr Norrish and Mr Cheetham saying agents face a shortage of listings to meet strong buyer demand.
“(The challenges ahead) would definitely be a lack of listings given that we’ve had two years of extremely high volume sales,” Mr. Norrish said.
“It remains to be seen, but maybe extremely high values could lead to sales.”
Mr Cheetham said that while the heavy rainfall received so far in most areas has been positive for farmers, it has posed challenges for property marketers.
“As good as it has been to see such a wet growing season, it has become difficult to just show buyers of certain farms due to the humidity, but it is a short-term problem that can be managed,” did he declare.
“I think the main objective and the challenge for farmers will be to capitalize on the unique season we are living and to optimize their production.
“Timely phasing out fertilizers, herbicides and fungicides has been a challenge so far, and waterlogging has started to reduce yield potential in some areas.
“As good as a rainy season is, it always brings challenges.”
ANZ’s InFocus Commodity Insights for June 2021 reported that many industry commentators anticipated a shift in the agricultural cycle for some time, which would be a scenario where the prices of major commodities start to decline – in particular livestock and grain, a fall in land prices and at the same time, interest rates would start to rise and a tightening not only in repayments for many businesses, but also in the rate of growth of their business.
ANZ said the fact that the industry did not turn in the opposite direction by mid-2021 was due to a combination of factors.
“Good rains in Australia mean that restocking continues to pay high prices to put cattle and sheep in their grass, while global feed demand and food security concerns have kept grain prices low. a high standard, ”ANZ said.
At the same time, while the economic recovery from COVID-19 has undoubtedly continued, it has not quite reached the point in many countries where a rise in interest is needed to temper it – but it will be.
“In the future, as long as conditions remain ideal, producers will continue to maximize their opportunities.
“But as with any cycle, they should continue to prepare their alternative strategy.”
Mr Cheetham said this particular season holds great potential for farmers, suggesting that the value of farmland will remain strong.
“There are many key factors at play, but if you consider that there is potential for a bumper crop result, commodity prices are generally high, interest rates remain low, many farm businesses are in their strongest financial position ever and there is a long positive period. long-term prospects for Australian agriculture, then all bodes well for the value of farmland to remain strong and continue to rise, “he said.
“However, there are always unforeseen events and forces, so time will tell.”