LAST Wednesday’s Weekly Property Review made the suggestion that a cattle property market earlier dominated by institutional purchases above $20m is now favouring smaller, farmer-to-farmer transactions in the $2m to $5m price bracket.
The so-called two-tiered market which was evident earlier this year, has now come together, according to CBRE Agribusiness regional director Danny Thomas.
There are a number of reasons for the re-alignment, including strong cattle prices, cheap money and rain.
Col Medway, CBRE Agribusiness NSW & ACT manager, said banks now appeared willing to support good long-term family farming businesses for purchases in the sub-$10 million investment bracket.
“It’s the old story. If you are a generational family farming business and a new property is not being purchased every generation, the business will go backwards. Most long-term successful families understand that and are seeing the time as being right to make the next move,” Mr Medway said.
He believes it is a good time to sell, especially in high rainfall areas of NSW where there are more buyers than sellers.
Rockhampton-based Elders rural property specialist Virgil Kenny said in Queensland, there had been a changing of the guard in some areas, and many large-scale properties held by well-established families were now being sold.
“Some of them are winding down. Others are looking at purchasing in other areas to offset another holding, in order to square off debt,” Mr Kenny said.
There were buyers in the market at all levels, but locals were prepared to pay more to secure premium Queensland breeding country.
“The market is stronger for better class country in this region. It hasn’t gone silly, but it has certainly firmed. That’s where the competition is – buyers are lining up, but listings are down.”
Danny Thomas agrees that the time may be right to sell.
“Vendors, particularly those in western Queensland, are anxious about whether they have or haven’t had any rain. The reality is local buyers are taking a multi-generational view – they look beyond the seasons. With liquidity in farm lending and farm management deposits at record highs, now is the time to test the market. Property owners have got everything to gain and nothing to lose by exploring the opportunity to sell their properties,” Mr Thomas said.
Strength seen in family-scale cattle bidding
Clear evidence of the demand strength coming from established family-scale cattle enterprises was seen at the recent Brisbane auctions of Blackall properties, Northampton Downs and Inverness, sold under the hammer for a combined $27.5m. There were at least 20 pre-sale inspections and four active bidders on each – all well-established family-scale cattle operators, drawn from North Queensland all the way into NSW.
Strong results were also achieved at a number of other recent cattle property auctions in Central Queensland.
Two local graziers aggressively bid for the 3500ha Moura property Warrenlea which eventually sold for $5.775m after being passed in by agents GDL Ruralco earlier in the day. Elsewhere, three locals battled it out for the 2422ha Bauhinia property Wongaburra which was purchased for $6.15m or $2540ha by the Scott family, who holds country in the Moura district and owns Scott’s Transport in South Australia.
What does the future hold?
Mr Thomas is predicting a steady cattle property market across eastern Australia over the coming year.
“There has been a significant change in land values. I don’t know whether we’ll see another rise over the next 12 months – I think it’s more likely the market will stabilise and this will be the new norm in pricing.”
Mr Medway doesn’t think values will rise any further. “There’s been quite a lift in the last six months. There is no doubt that existing family farming businesses understand their profitability and they understand debt serviceability, so the good ones don’t get ahead of themselves.”
He said properties in central and southern NSW were achieving close to $400 DSE bare.
“There are plenty of sales starting to push those levels – which have never been seen before. Just 18 months ago, they were $330-$350 DSE. Now I know people want to hang their hat on numbers, but there are lot of variables in that such as property location, arability and topography.”
However, Mr Thomas ruled out ‘irrational exuberance’ which was seen in the overheated 2007-09 period.
“If you were to graph commodity prices against unit rates of cattle and sheep properties today, you’d see them moving together. If you were to look at the same graph eight years ago, commodities were stagnant or declining, while property prices were rising 10 or 15 percent compound,” he said.
Mr Medway cited a similar period in 2001-03. “There was no correlation between profitability and the rise in land values. Today, the fundamentals are better in-line, and there’s a strong correlation of the reasons you’d expect to see for prices to be rising.”
Over the coming 12 months, Mr Kenny doesn’t anticipate a dramatic price hike in Queensland.
“Right now, the value of land is in grass and water, so we will continue to see property sales that can fulfil those needs.”
“Buyers will step forward to purchase good breeder country with good proximity to markets in order to build their breeder numbers, purely because of where the steer market is today. It is the cheapest way to supply their own market – buying breeder country to breed their own cattle and build up numbers. I believe this type of country will become much more sought-after,” he said.