Property

Weekly property review: Supply and demand pendulum shifts – what impact is it having on vendor expectations?

Property editor Linda Rowley 29/05/2024

SEVERAL years ago, demand for rural property was outstripping supply. Today it is the reverse, with a flood of properties on the market. Are the buyers out there to absorb them?

In this week’s property review, industry stakeholders share their thoughts on the current state of play.

LAWD director Col Medway said it was the nature of the beast – supply goes up and supply goes down.

“Supply of properties currently listed is significantly higher than it has been over recent years, but is it high compared to history? I’m not sure, but it is not out of the box,” Mr Medway said.

“What we have is a fair bit of carry-over stock from last year that agents are working hard at moving through the pipeline,” he said.

Col Medway

Mr Medway said supply was outstripping demand which was a reversal of what was happening over the last three or four years – when demand was outstripping supply and pushing up prices.

“Values are not at the level achieved in spring 2022 – when they hit the top. Prices are down around 10 to 15 percent but are still historically very strong.”

He said most of the vendors he was dealing with were happy to transact at those adjusted values.

“Vendors accept the property market is not where it was in spring 2022 and yet they are still willing to transact – but it isn’t a case of selling at any cost.”

When asked if property prices were likely to fall further, Mr Medway said there could be some stand-offs, but eventually buyers would blink before vendors did.

“If a producer reads what is in front of them – in regard to seasonal conditions and livestock pricing – the outlook is pretty good. So, producers are experiencing a crisis of confidence – which happens when the share market experiences bull runs and bear runs.”

When it comes to the reasons why owners are listing their properties in greater numbers at present, Mr Medway said it was a case of looking too deeply into shallow water.

“When analysing the motivations behind each of the vendors selling, there is no pattern. It is just a matter of timing, succession, health, or change in strategy.”

Describing the current market as “spluttery”, he said a property listed for sale could receive a run of good inquiry, followed by virtually nothing.

“There is no consistency. However, as the year develops, I believe the flow will improve. Inquiry is beginning to increase in the wake of lower property prices, as buyers see value and are making figures work.”

“The corporates are still in the market but there is no buyer urgency.”

Mike Clifton, Elders

Elders Dubbo-based agent Mike Clifton reports plenty of activity in his region, but said buyers had more choice and in the current economic climate, the ones with cash are spending it wisely.

“Medium to large-scale family operations looking to invest are taking a cautious approach to what is available and seeking to maximise their value proposition.”

Mike Clifton

Mr Clifton urged vendors to be realistic and price properties competitively.

“Properties will transact if they are sensibly priced. I am not suggesting massive discounting, but the heat has gone out of the market and vendors must recognise that if they want to sell.”

“Sellers are unlikely to make what the neighbour’s equivalent place sold for two years ago, because prices have come off the boil. My advice is not to add a premium, because potential buyers will be frightened away,” he said.

Mr Clifton said the market was currently sitting in a very interesting time in the property cycle.

“It is difficult getting people to commit and that is why vendors need to be keenly priced to entice commitment from buyers.”

“Two years ago, it didn’t matter what was listed, it would sell in ten minutes. Now it requires more ‘agency 101’ to work more closely with clients and get deals across the line.”

Mr Clifton said there would always be strong interest in neighbouring properties, especially in well-located or tightly held areas.

“Generally, the number of inquiries per property has dropped significantly in the last 12 to 18 months, but the level of inquiry is more qualified and looking to transact based on realistic values.”

He advised buyers to be well organised and complete their loan pre-approvals prior to an auction.

“The lending process is more complex these days due to changes in banking requirements. There are more boxes to tick which means approval times take longer which can disrupt campaign timelines.”

Finance approval

Rabobank Southern Queensland regional manager Brad James in this earlier property review claimed the banking industry was generally experiencing slower approval turnaround times, due to heightened levels of due diligence associated with regulatory requirements and increased level of analysis on any given finance request.

“Banks need sufficient time to fully assess a producer’s ability to meet the proposed finance commitments and while the delivery of approvals or ‘speed to market’ is slower, there are less producers experiencing financial difficulties due to debt load,” he said.

Mr James said solicitors and accountants were showing a greater appreciation of the timeframe it now took to deliver an approval and agents are gradually coming on board.

“The finance clauses for sizable loans for major property acquisitions (as opposed to an increase for working capital) have increased from seven days to 14 days plus.”

He said most solicitors recognised this, and were notifying clients that approvals can take up to 30 days in rare circumstances.

Mr Clifton said Brad James made a valid point regarding time frames, but he expects a push-back from agents.

“Due to the cost of advertising, an auction or expression of interest campaign typically lasts around six weeks. There is plenty of inquiry in the first two to three weeks, but a longer campaign runs the risk of losing to another opportunity,” he said.

“People who are keen to make a move typically have their eye on numerous properties – particularly when they are many on the market.”

Carl Warren, TopX

At a time when many properties are being passed-in due to a cautious market, a lack of confidence and an oversupply of listings, Roma’s 4477ha Pamaroo recently defied the odds, achieving a stellar result at auction.

The high carrying capacity country in southern Queensland’s Maranoa sold for $26.3 million ($5874/ha bare).

Carl Warren

The traditional bullock country is renowned for being highly productive but during the marketing campaign, TopX Roma agent Carl Warren wasn’t sure what impact the GHPL (Grazing Homestead Perpetual Lease) would have on the sale price.

“Potential buyers could have deducted the current freehold conversion price (typically around 25 percent of the current unimproved land value) but in the end, it equalled many freehold property prices achieved in the district.”

Pameroo is located in a secure, tightly-held district and presented with clean and open brigalow, bottle tree and belah country with undulating softwood scrub hills and sweet flats.

After a good start to the season, extensive areas were growing a large body of buffel and improved pastures estimated to run around 1100 cow and calves.

Despite presenting well, Mr Warren said the vendors went to market with realistic expectations in the current circumstances.

“Many sellers are still hoping for high prices achieved over recent years. However, those levels were realised in a very different market,” he said.

“Knowing where the market has been and what the market is doing, interested parties were told about the realistic price expectations for Pameroo and as a result, buyers turned out in force.”

Geoff Warriner, JLL Agribusiness

When it comes to property prices, JLL Agribusiness director Geoff Warriner said northern Australian markets were holding.

“Property prices are strong, despite fewer buyers in the market and a slow decline in the number of properties transacting,” he said.

Geoff Warriner

“Transactions may be taking longer but ultimately they are achieving at or above expectations,” Mr Warriner said.

Late last year, the market slowed as producers adopted a cautious approach, mindful of long-term weather forecasts for an ongoing dry spell and uncertainty around interest rates.

However, Mr Warriner said subsequent rain instilled confidence among both buyers and sellers.

“This is paired with a market that has seen interest rates stabilise with short-to-medium term predictions they will fall.”

“Current mixed cattle prices are also forecast to rise towards the end of the year, as per normal patterns, and this should further increase producer confidence,” he said.

JLL reports a strong listings pipeline for the remainder of the year across on and off market campaigns, including Burnbrae (Moonie, Qld), Mudabie (Eyre Peninsula, SA), Coralie (Gulf Region, Qld) and Noondoomally North and South (Inglestone, Qld).

Matt Horne, Elders Deniliquin

Deniliquin-based Elders agent Matt Horne has more than ten properties under contract at present but said several of these sales have been conducted off market.

“Logical buyers have been identified and matched to particular properties bypassing public marketing campaigns,” he said.

Matt Horne

Mr Horne said each property was assessed on a ‘case by case’ basis.

“If there are some good progressive locals or outside inquiry, and the circumstances are right, then a deal happens. In some other instances, property has remained on the market longer than the vendor and agent would like.”

Mr Horne said despite uncertainty over interest rate movements and commodity prices, property prices in his region remain sound.

“At present, prices are not softening in our area, and most sellers haven’t had to significantly lower their expectation to get a deal done. It has not been critical for our vendors to sell so they continue to farm on while they wait for a purchaser to surface.”

Mr Horne said recent sales have seen both local and interstate buyers acquiring farmland throughout the Riverina.

“Many local farmers have a focus on expansion, as scale is where they are achieving greater machinery, labour and overall operational efficiencies.”

A mixed farm north of Deniliquin recently sold to producers from Broken Hill who were relocating south for a more reliable climate, security of irrigation, greater schooling options and general services, he said.

Mr Horne is confident the rural property market will remain firm throughout the 2024 year, with seasonal conditions to play a major hand in clearance rates.

 

 

 

 

 

 

 

 

 

 

 

 

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