AS 2017 draws to a close, property industry experts share their thoughts on the year that has been, and what to expect over the coming 12 months.
Herron Todd White rural director Tim Lane described the 2017 cattle property year as “wow, wow, wow.”
“There may have been fewer transactions, but they were strong, and interest was solid,” Mr Lane said.
“It was a year shaped by early activity during the first half, which slowed in the second – possible due to softer beef prices and/or a lack of available supply.”
Sale and lease-back trend
Mr Lane said demand was there, but finding the right asset was still an issue.
“What we did see was the emergence of some large sale-and-leaseback type transactions in the marketplace – almost like a new investor profile outside the more traditional corporate or family operation.”
He said what had been interesting this year was big price movements in the central and eastern Queensland space.
“We didn’t think we would ever be putting up $5000/AE for a long time, but we jumped very quickly from mid-$3000s to $5000/AE in the space of an 18-month window, and that is a big percentage shift in anyone’s language.”
Jason Michelmore, Landmark Harcourts’s North East Region Real Estate Manager (QLD & NSW) believes 2017 has been the best selling market he has ever seen.
“It has been a terrific year with transactions across all levels – from the higher end, right down to the lower end of the market. A fair percentage has been off-market, particularly at that higher-end or corporate level, while any grazing properties in the mid-range (sub-$10m) tend to go to market.
Mr Michelmore said compared to the previous 12 months, 2017 was stronger.
“Many people were trying to work out what the market was doing and where it was headed. While the cattle market was on the rise, there was still uncertainty, but it just gained momentum from there,” he said.
Return of the local buyer
Tom Russo, the general manager of Elders Real Estate, said last year’s themes carried over into 2017.
“Confidence from buyers seeking to acquire quality properties with scale continues to buoy the market, because of robust commodity prices and good interest rates. In addition, thematic drivers such as food security from ASEAN nations continues to feed supply and demand.”
However, Mr Russo said there were two key differences this year:
- Lack of stock – there is more money than opportunity, which is keeping the cattle property market buoyant.
- The return of the local grazier – good conditions and good balance sheets has resulted in solid competition from the local market.
He noted that off-market transactions had substantially increased, particularly in the number of farmer-to-farmer transactions.
“We have brokered a whole lot of country off-market for other clients as well. These vendors are prepared to sell at the right price, but they do not want to embark on a big public marketing campaign.”
Shortage of listings
HTW’s Tim Lane said most producers who had livestock were making good returns this year, even if prices have come off the boil after 2016.
“The incentive to sell for financial reasons isn’t the same as it was. Broadly speaking, there is a more positive outlook for the sector and that continues to support producers wanting to expand, rather than exit.”
He said there was buyer appetite, but not the supply of listings to match it.
“It is not just the beef sector, it is all agricultural markets, with certain assets appealing to certain capital. As a result, there is more door-knocking, trying to bring properties to market that fit a spec that someone is looking to acquire.”
Mr Lane said 2014 and 2015 were led by the corporate end of the market, but times had changed.
“The local grazier stepped into the market in 2015 and continued to consolidate in 2016 and 2017. It is a good sign of a strength of market when there are multiple layers of interest looking to invest in the sector.”
“Good assets will always attract interest and always sell well, but a lot of those transactions have been executed and that is why you can expect supply difficulties – hence the door knocking,” Mr Lane said.
Predictions for 2018
Elders’ Tom Russo believes similar conditions will be experienced in 2018.
“It is difficult to see a change in the macro-economic environment. With confidence in commodity prices and low interest rates, there is still plenty of money looking for good quality assets. People, with buyer power in their balance sheets, looking to achieve scale will keep seeking opportunities.”
On the flip side, Mr Russo said many producers are holding on to their grazing assets because they are making good money out of cattle.
“For them it is a matter of deciding when is the right time to exit.”
The year of the big corporate transactions was 2016. How many more of those are out there? Mr Russo doesn’t know – simply because there aren’t that many opportunities around.
“There is some fantastic confidence in our local market and existing operators are transacting and growing. It is a wonderful thing. Most of the sales are going to locals and if there are foreign buyers, they have very good quality local people managing their assets for them.”
From a property cycle point of view, Tim Lane believes the market is fully-priced.
“Over the coming 12 months, there will be the occasional sale that represents an increase in overall values on a rate per hectare equivalent, however much of that uplift has been had, so we would expect to see the market track sideways.”
He said while he was expecting more of the same, there were some potential risks.
“A combination of rising energy costs, higher interest rates and a further downward shift in beef pricing would soften the market and stifle appetite and demand.”
Landmark’s Jason Michelmore believes 2018 will see more of the same.
“Listings will probably be a bit tight, higher-end transactions will continue to be sold place off-market, and cattle prices will remain strong, which means another bullish year ahead. However, we are not expecting any huge rises. The property market should stay on a relatively level playing field.”
This is Beef Central’s final weekly property review for 2017. I wish all readers and our property industry contacts across Australia and overseas, a Merry Christmas and a safe and happy New Year.
Our weekly property news will return in February 2018. In the meantime, readers may be interested in perusing Property Central’s “Properties for Sale” listings or our “Recent Property Sale Results” – both featuring easy-to-use search functions.
– Linda Rowley, property editor.
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