THE general property market in southern and western New South Wales continues to show strengthening signs, Herron Todd White director, Scott Fuller reports in the most recent HTW monthly rural property review.

Scott Fuller

Mr Fuller, based in Dubbo, said generally, the level of sales activity in the region had dropped slightly, however this was a reflection of a lack of listings, rather than a softening of market interest overall.

“In far western NSW, we’re seeing new benchmark levels set in dollar per DSE rates achieved,” he said.

An example was the sale of Berta Station, a 43,500 hectare holding with a carrying capacity of 10,000 DSE located 120km southwest of Broken Hill on the South Australian border, which recently sold for $5.38 million – equating to $124/ha overall.

“From a productive capacity basis this equates to $527 per DSE. These rates are generally seen in tablelands country in far higher rainfall areas, but like all market activity, there are always outlying sales and it appears that this sale is one of those,” Mr Fuller said.

“However it does indicate the willingness of buyers in the current market to stretch the normal excepted boundaries in terms of a value perspective.”

Two examples of the level of strengthening within the current market are some revaluations HTW has recently undertaken in the region.

“We recently visited a large, mostly arable grazing property in the Cootamundra area which we last valued in June 2016. Our current assessed value for the same property has risen by 26.7 percent over the 19-month period, with a number of solid large-scale sales to support this assessment,” Mr Fuller said. “This equates to 1.4pc per month over 19 months, which is quite phenomenal.”

HTW has also revisited some larger grazing properties to the north-east of Broken Hill which were last valued in late 2014.

“Our current assessment indicated a 28.8pc rise in overall value, which equates to 9pc per annum – still a strong result.”

Where is the property cycle up to?

“We are often asked about the market, where we are in terms of the property cycle and whether buyers should be active in the heated market that currently exists,” Mr Fuller said.

“Generally our view is that as long as buyers are informed, knowledgeable about current market activity and aware of the most likely movements in value levels over the next five years (which when we peek this year will be reasonably flat), then participating in the current market can be justified.”

When building a business plan for a rural purchase at present, Mr Fuller suggested it would be prudent not to allow for any capital growth in the short-to-medium term, as this same situation occurred back in 2008.

“Our experience then indicated that generally the rural property market in NSW peaked in late 2008 and general value levels softened slightly and then were steady for a number of years. There were a number of corporate purchases made at this time and our relationship with these assets over the ensuing years showed that the original value levels were not reached again for six to seven years.”

“While we are not saying that the market will perform exactly the same, it does have a history of repeating, and our expectations are that a similar scenario will result over the coming 12 to 18 months,” Mr Fuller said.

“The difference in 2018 is that our interest rates are at record lows and are still encouraging investment from within the industry, so we may just see the golden period continue for a bit longer yet.”