Capital gravitates to better quality assets when markets peak, HTW property briefing hears

Jon Condon, 27/03/2024

THERE’S been a pronounced easing in the growth trend in rural land valuer, Herron Todd White’s Australian Grazing Property Index during 2023.

Speaking during HTW’s annual rural property market briefing in Brisbane last week, regional Queensland director Will McLay opened with a summary of the index pictured above, suggesting this year, particularly, set a tone for some of the market trends and broader picture about what’s going on in the property market.

The annual index covers all grazing property sales greater than 2000ha, and plots the trend over 43 years, starting in 1980.

The longer term trend shows an average rate of growth around 10.2pc, but as seen in the graph above, there’s been a much more significant increase, averaging 28.6pc over the last five year period.

Will McLay HTW

“However over the last 12 months, that’s moderated quite a bit – back to 6.6pc,” Mr McLay told last week’s gathering.

“When markets reach their peak, as they currently have, it’s been my observation that capital gravitates to better quality assets – and that can inflate some of the data-sets and growth rate statistics, by virtue of the median per-hectare rates being probably a little stronger than what they actually are.”

Broken down by state, for grazing properties above 250ha, that trend of ‘money going into better quality properties’ is again exaggerated, when smaller properties are captured, Mr McLay said.

Growth rates when the smaller properties are included (see table below) are again a little stronger. Again the past ten years in all areas is stronger than the longer term trend.

In terms of the number of properties above 250ha sold, there has been a clear decline in the number of annual sales, which was a factor of consolidation over time, as smaller properties are aggregated and grouped into bigger parcels, Mr McLay said.

That contrasts with the graph below, plotting the total annual transactional value for rural properties 250ha or larger, which reflects a huge amount of transactional activity over the past four years.

Last year the figure was around $8.3 billion, the fourth highest on record, but still a little down on the previous two years.

“It’s not necessarily a softening trend, but a little more consolidation,” Mr McLay said.

Northern pastoral markets dominated by family buyers

Looking at some of the northern pastoral markets (Qld, NT, and northern WA), the list below of all transactions above a $20 million threshold that occurred during 2023, shows that family buyer group remained the dominant purchasing participants during 2023.

Out of the 16 transactions listed below, 11 were bought by private family interests, Mr McLay said.

Among the five corporate purchases of the +$20m properties listed, RFM bought Coreen Aggregation and Wyseby; Consolidated Pastoral bought an adjoining property, Langley; QIC bought Stuart’s Creek and the Kimberley Portfolio went to an institutional purchaser (more details in a later report.

“The take-home from this is that the institutional investors have perhaps reached a limit, where the returns in these assets no longer meet their criteria,” Mr McLay said.

“The family operators who aren’t bound by such strict investment conditions remain able to push forward in these markets. In my view, in most cases these assets (2023 sales) have reached higher values than the previous year,” he said.

Click on image for a larger view

  • A separate report will follow after Easter plotting some of the significant sales identified by HTW across the northern pastoral market over the past year.




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