Land: the new gold rush in the Hunter Valley

Cover image courtesy of Commercial Real Estate

A little over two years ago, when much of New South Wales was gripped by drought and fire, Arrowfield Stud purchased a 700-acre parcel of property along the Williams River in the lower Hunter Valley. Summer Farm would be a broodmare and young stock facility, and an opportunity for the main farm to rest its paddocks in the Segenhoe Valley.

Fast forward just two and some years and New South Wales is in a different way. Rainfall and floods have replaced extensive dry, and as green grass and good conditions abound, Arrowfield has reassessed its need for Summer Farm.

The property was put on the market three weeks ago, all 702 acres of rich river frontage with its purpose-built fencing and generous facilities for broodmare accommodation. It coincides with probably the biggest-ever boom in the region’s rural property market, at least according to local real estate specialist Michael Burke.

Burke is the managing principal of McGrath Upper Hunter, based in Scone, and in close to 20 years of being in the business of selling agricultural holdings, he can’t remember a healthier market.

“I can’t ever recall it being as good as it is now,” he said. “For us, the last 18 months has been a record period. We’ve seen a sharp increase in the value of property prices within the Upper Hunter Valley, and that’s been a direct result of a number of things.”

For Burke, who knows the Upper Hunter very well, the key economic drivers in the region give a clue as to why the regional property market is so good. He mentions the robust state of local coal, which can go against public sentiment but which is responsible for healthy and widespread employment.

In terms of the thoroughbred presence, which is the second-leading industry in the Upper Hunter, racing has weathered the COVID pandemic like few other sports. Prizemoney levels are record, as are the auction-ring results.

“Racing NSW has kept racing on the televisions and betting turnover ongoing,” Burke said. “That has resulted in Racing NSW being the beneficiary of $20 million for the development of a regional centre of excellence at the Scone Race Club. It will double the number of horses trained at Scone eventually, and all of this is driving a peak interest in the thoroughbred industry into the Upper Hunter Valley.”

At its most basic, land is at a premium in the region, making it a good time for Summer Farm to be on the market. The property is just north of Glen Oak on Clarence Town Road, just half-an-hour from Maitland.

“It’s been developed in true Arrowfield style,” Burke said. “It’s a gold-standard development, and they bought a number of contiguous properties located on the Williams River just 30 minutes outside of Maitland.

“The infrastructure that Arrowfield has developed was designed to host a significant number of the main farm’s mares between the summer months from January through to March, so it has a capacity of up to 200 mares and it’s largely rolling, arable horse country. It’s very well-located to the Upper Hunter stallion stations, as well as the major provincial tracks.”

Summer Farm is a good example of a high-end thoroughbred farm currently on offer in a robust regional property market. When he listed it, Burke marketed it directly to the thoroughbred industry for obvious reasons, and it stood to logic that the bulk of interest has come from the thoroughbred industry. It also has strategic merit for a higher usage, should zoning permits eventually allow.

“We are receiving combined interest from the industry and from the top-end lifestyle market, but also from buyers that are looking at the real estate/land-banking capacity of the asset,” he said.

Where’s the money coming from?

Right now, Summer Farm is meeting the needs of what much of Burke’s database is looking for – a well-fitted rural property that needs little done to it to become operational right after settlement.

“I’m finding there’s been a reluctance by industry participants to show an appetite to develop properties,” he said. “And that’s because of the price, the coordination, the lag time, the dealing with planning departments. The general consensus is that turn-key operations like this one are far more attractive than blank canvases.”

Gallery: Images of Summer Farm, images courtesy of Commercial Real Estate

Summer Farm is being sold as a land, fixed improvements and water entity only. It’s a lucrative piece of real estate and the latest to reach the market in the last 12 months of lively trade.

Burke recently handled the sale of the long-running Ashleigh Thoroughbreds to Nick and Jasmine Hodges’ Riversdale Farm, while ‘Dalama’, a 780-acre equine property on the Upper Dartbook Road, a stone’s-throw from Scone, was sold to an internationally based Australian investor this year.

Dalama was sold after just 28 days on the market, which Burke says is a pertinent point.

“The days on market for stud farms at the moment, at least those under the $8 million price point, is expected to be sub-30 days, providing the asset is appropriately priced,” he said. “That’s a healthy radar but it’s not the norm. I’d say the days-on-market average has reduced significantly in the last 12 months.”

So where is the money coming from to drive these local prices in the Hunter Valley?

“There’s a lot of money coming out of the city,” Burke said. “A lot, and if they’re not buying, they’re applying a lot of pressure. They’re coming either second or third if they’re not coming first.”

About 25 per cent of Burke’s annual portfolio in the Upper Hunter is horse farms, and of those, he said that about 65 to 70 per cent are thoroughbred properties.

“But there’s not a huge volume of sales and there never is,” he said. “I can go through and list stud property sales in the Hunter Valley, generally speaking, in the last 20 years and rarely do they change hands, and I’d suggest it’s based on the entrenched nature of the industry. There are few farms that have actually withdrawn over the course of the last 20 years.”

Big fish in a shrinking pond

Largely, the very established stallion farms have remained constant in the Hunter Valley for the last two decades. Almost with the exception of Newgate, the vast majority have been solidly entrenched for 15 years.

“It is interesting, and we’re just not seeing a lot of new entrants coming into the stallion-farm market,” Burke said. “The big guys are getting bigger and you can probably say the smaller stallion farms are getting out of it.”

Steadily, the stallion scene in New South Wales has centralised into the Upper Hunter Valley, and it’s an important part of the discussion when considering the value of stud properties in the region. Burke said that particularly around Scone, times have changed considerably in that respect.

“When I first starting selling country for Macallum Inglis in 2003 and 2004, the Upper Hunter had a reasonably broad number of stallion farms across the whole geographic area,” he said. “Over the course of the last 19 years, a lot of centralisation has taken place and a lot of smaller stallion stations in outlying areas have closed as the rosters of the Scone-based and Jerrys Plains-based farms get bigger.”

In other words, the fish have gotten bigger in the small pond. Burke remembers his childhood in the Tamworth district and such farms as Stratheden Stud, which belonged to Brian Marheine, and Rossmar Park, which once stood half-a-dozen stallions near Quirindi.

“The bush racing scene has changed so much too, and there’s been a huge reduction of thoroughbreds in those areas,” Burke said. “Also, the price of stallions has now become something that people up there wouldn’t be willing to risk these days.”

Thoroughbred real estate, as a result, has evolved. In the Hunter regions, particularly in the Upper Hunter, its value has exploded. In regions like the New England and northwest, it has probably reduced on what it might have been worth 25 years ago.

Also, regional property as a whole has become a valuable commodity, and that includes both lifestyle holdings on small acreages and elaborate, well-equipped listings like Summer Farm.

“The regional property market has been the beneficiary of improved commodity markets,” Burke said. “Yearling prices and stallion fees, and also the markets in grain and proteins, have all driven increased investment into rural property.

“Concurrently, the positive effect of COVID has been a push in regionalism whereby metropolitan buyers have extended their searches into greater regional and rural areas, and metropolitan buyers have become a reasonably large part of the buying bench now.”

It remains to be seen if a cashed-up city buyer will come forward for Summer Farm with its elaborate facilities and Arrowfield stamp of excellence. If the past 12 months are anything to go by, it won’t be on the market for long.

Regional property seems to be skating along immune to the ups and downs of things like inflation, COVID and shaky consumer confidence, and this is both surprising to Burke and not surprising at all.

“Regionally, it’s almost like the market up here is running at a separate speed to any other,” he said. “It’s a gold rush.”