Economy of scale drives sales

Economy of scale drives sales

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Elders general manager real estate Tom Russo and real estate manager SA/NT Philip Keen are busy preparing for the sale of the historic Wertaloona Station.

Elders general manager real estate Tom Russo and real estate manager SA/NT Philip Keen are busy preparing for the sale of the historic Wertaloona Station.

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Arguably one of the most notable transactions in the South Australian rural farmland market in 2019 was the off-market purchase of the 4000 hectare Kadlunga aggregation in the Clare Valley by the Millington Family.

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Arguably one of the most notable transactions in the South Australian rural farmland market in 2019 was the off-market purchase of the 4000 hectare Kadlunga aggregation in the Clare Valley by the Millington Family.

That transaction was originated and negotiated by Tom Russo (general manager real estate) and Philip Keen (real estate manager SA/NT) at Elders.

Mr Russo and Mr Keen are now preparing for the launch of the historic Wertaloona Station sale.

Mr Russo said the farmland market enjoyed growth in 2019 despite the drought.

"Notwithstanding the continued severe drought conditions in some regions, we have continued to witness strong farmland value growth across the board," he said.

"The combination of low interest rates, strong commodity prices and the bullish outlook for soft commodities has been driving demand for quite a while.

"However, the interesting new trend is a marked decrease in transaction volumes.

"This is largely driven by owners either holding to enjoy continued strong operational returns, or wishing to hold back sales until favourable seasonal conditions return in drought impacted areas.

"This has further increased the supply and demand imbalance, thereby contributing to further competitive tension and value increases."

Mr Keen said some sectors out performed others, as did some regions.

"Obviously we've seen very strong interest in properties located in high and reliable rainfall areas," he said.

"For example, the south east is experiencing unprecedented levels of interest and very strong price growth.

"We also continue to see strong interest in renowned reliable cropping districts across the state.

"The outlook for livestock values is strong and will also underpin confidence and land pricing moving into 2020.

"The vineyard sector continues to enjoy a renaissance off the back of enormous demand growth for wine from international markets, particularly China.

"This resulted in strong pricing for grapes, flowing through to property values.

"This is heightened in regions renowned for producing super premium product.

"Prior to the decline in water availability, we were witnessing heightened demand for quality horticulture development properties and significant competition to secure good assets.

"Low liquidity in the water markets and rising water prices resulted in demand essentially disappearing.

"Should the drought break and water markets normalise, we would expect to see renewed interest."

Mr Russo believes 2020 will continue to see the aggregation of properties in quality farming areas as both local farmers and corporate investors will continue to look to realise economies of scale.

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