Facebook Twitter

Weekly Property Review – Crystal ball gazing into land value prospects for 2017

by Property editor Linda Rowley, 08 February 2017
6

AT THE start of every year, industry stakeholders want to know what’s going to happen in the beef cattle sector over the following 12 months.

Loading cattle on AA Co's Canobie Station in northwest Qld

Loading cattle on AA Co’s Canobie Station in north Qld

It applies as much to rural property values as it does to the cattle market, so Beef Central asked some seasoned experts to put forward their predictions for 2017. Who is right? Only time will tell.

Opinions are based in general on the assumption of the arrival of a late wet season in those parts of Queensland that are very dry at present.

Veteran Brisbane-based rural property broker at Elders, Dick Allpass believes the Australian cattle property market will continue to rise through 2017.

“It will keep trending upwards due to a multitude of factors including a good season (in some areas), low interest rates and a strong cattle market,” he said.

“The outlook is certainly positive, but there is a shortage of large well-stocked properties of any kind and it’s difficult to sell properties that don’t have any stock.”

Jason Michelmore

Jason Michelmore

Jason Michelmore, the new Queensland and Northern Territory real estate manager for Landmark Harcourts, largely agrees with those sentiments.

“I am expecting a bullish 2017, similar to the previous 12 months which saw a lot of good sales, record sales and sales that achieved well above agent’s expectations.”

“Agents are now vying for cattle properties because there is plenty of buyer enquiry and activity, both locally and from overseas.”

Mr Michelmore said there were a number of key factors that will dictate the success of cattle property marketing campaigns this year.

  • Investment – foreign and local appetite is still strong, especially from larger corporates or investment funds.
  • Low interest rates – money is still easy to come by in terms of borrowing from financiers.
  • Cattle prices – the main driver giving people the confidence to purchase properties.
Danny Thomas

Danny Thomas

However, CBRE’s regional director of agribusiness Danny Thomas predicts cattle property values are more likely to stabilise, rather than rise in 2017.

“I am not expecting any sharp increases across the eastern seaboard of Australia for grazing land. We are seeing some well-established levels of value, particularly in northern Australia and in the south, cattle property values will continue to be very robust,” he said.

“The Angus and Wagyu market is driving demand for quality country, not just from the likes of Gina Rinehart, but from other established players. There is also very strong demand for northern NSW and that higher rainfall area where you have seen RIFA and Paraway make some significant recent purchases,” he said.

Mr Thomas said CBRE was working towards a number of ‘new and significant’ southern properties ready for autumn listing.

“One is a large Angus beef businesses with a thousand cows plus. We are expecting strong demand from local existing players and also from several northern players who are looking for more flood bank exposure.”

All agents spoken to were anticipating a good level of transactions in 2017.

Mr Michelmore is confident there will be an increased number of properties coming to the market.

“Many graziers want to purchase land to complement their existing holdings. Those with a traditional fattening block are seeking a breeding block, and vice versa, to give them flexibility.”

He said drought-affected places in western Queensland with financing or debt issues were also likely to sell.

“The time is also right for vendors wishing to exit the industry”

“Now is the time to square-up those properties. The time is also right for vendors wishing to exit the industry. Holdings that have received good rain can be presented in good shape, but as long as everything on a property is functioning, such as bores and there is decent fencing, the rest takes care of itself.”

Mr Allpass said the current financial and industry climate was an ideal time to sell or exit the industry.

“The circumstances are right to quit any property. If landholders miss this opportunity they could wait another ten years for a better environment,” he said.

“A lot of people don’t have much time left if they are my age (late 60s+) and they want to get the last bus out. People are funny when times are good, they decide to hang on a bit longer, but they don’t want to miss the cycle.”

Mr Thomas agrees that the current market situation will activate a few more vendors this year.

“Some people are suggesting if they don’t sell in this cycle, in terms of capital and livestock values, they might miss the boat. It may be several years, or longer, before the same upswing is repeated. If that’s the case, supply will be brought forward.”

Mr Thomas said for older landholders, this cycle will give them the opportunity to retire.

“Some graziers are going to be of an age where to suck up working capital to restock feels like being at the bottom of Mount Everest. Those landholders will usually have a crisis of confidence – not for their capabilities, but where they sit in the price cycle for both cattle and land. The question is, do they want to go through that rebuilding phase or offload into what is a pretty strong property market?”

Mr Thomas said last year, rural real estate agents lamented about a lack of listings. “This year, there should be a reasonable supply of listings, including a number of properties that people would not have anticipated.”

While he refused to elaborate, there is still talk in the market about whether the London-based private equity fund Terra Firma may look to offload its Consolidated Pastoral Company, which has around 367,500 head of cattle on 16 properties covering more than 5.6m ha.

Last year, CPC divested three well-regarded Central Western Queensland grazing properties.

There are also a number of unanswered questions about other big industry players over the coming year.

  • Has Paraway Pastoral completed its property acquisitions?
  • Has the Australian superannuation investment manager QIC completed its portfolio after acquiring an 80 percent stake in the North Australian Pastoral Company?
  • Will AA Co consider reorganising its portfolio?
  • Does Gina Rinehart have anything left in the kitty to expand her already large and rapidly-grown cattle operations?

Mr Thomas said across the board, big landowners would be considering whether they had enough breeding or finishing country.

In the meantime, he said there is still good interest evident from overseas investors.

“Everybody wants to talk about the Chinese, but they are just part of the market. Don’t for a second forget about the Canadian, United States and European money.”

He said there was still tremendous interest from local buyers. “A lot of larger families are making big moves while money’s cheap and commodity prices are robust. They are making purchases to set their families up for the next 30, 50 or 100 years.”

Several previous BC property reports have attracted reader comment suggesting that agents are ‘just talking up the market’. Mr Thomas admitted that was a completely reasonable assumption, but said he had no reason to do that in the current environment.

“The more I talk up the market, the harder it is to complete the deal. The commentary I am giving is my true reflection on what the market is doing. We are seeing some people (potential buyers) who, for the first time in a long while, have some balance sheet strength.

“We also seeing some liquidity in lending, and banks keen to place some money with those good operators who are taking the opportunity to expand.”

 

 



Reader's Comments


Comment
  • Michael J. VAIL February 9, 2017

    Old Italian saying, “If you ask the water-seller if his water is fresh, what do you think he will say?”

    Agents are always talking the market up; and there is always a reason to buy/sell.

    For a real answer (and I am not saying that these very experienced commentators above are not correct), go ask an experienced pastoral investor in this space is (s)he a buyer or a seller, or an experienced Fund Manager what (s)he will do with any spare money, or re-allocation.

    After all, when it is your hurt money on the table, there is more caution in the decision-making process.

    My view is; if you are ready to seek, do not try and pick the top of the market, just get your property presented well and go, soon.

    If I was a buyer/Investor, I would wait … and especially if I had to borrow more than around 25% of the total investment value.

    There are some big head-winds coming; both on-shore/domestic and off-shore. Much that happens overseas will haunt us here.

    Watch this space …

  • Geoff Hickson February 9, 2017

    I must say I agree with Michael.

  • Wayne Williams February 10, 2017

    The only point I agree on with Michael Vail is not to borrow more than 25 percent. Our company (Williams Cattle Co) has just purchased Kidman’s Anna Creek at close to that percentage. Michael, you need to remember that opinions are like backsides – everybody has one.

  • Michael J. VAIL February 10, 2017

    Thank you Wayne Williams for you comments above. 😂😂 we all have a mouth too; and most of my opinions come thtough there … 😂😂😂 but from my tiny mind.

    Good Luck with your purchase. I am sure you will do well.

    Most Investors I am talking to are waiting; due to unquantifiable risk and optionality of deferring the decision; based on investment metrics and interest rates driven by potential foreign exchange movements.

    Eventually the elephants will stop dancing …

  • Michael J. VAIL February 10, 2017

    Cheers, Geoff Hickson. Thank you.

  • Travis Hatfield February 12, 2017

    My wife and I have both been trying to sell a smaller property in order to aquire a larger and more viable one, in which my family and I can live off. Figures on both sides don’t add up. The profit margin in the last 20 years has decreased; yet the price of property has gone up 10 fold. Yes, we are all to blame for this price inflation. It is turning out to be a pretty expensive way of life.

  • Leave a comment

    (First Name and Surname Required) - read our Comment Policy

    (Required)

    (Required)