Central NSW is renowned as a mixed-farming region, and listings like Darriwell at Trundle are attracting plenty of interest as helped by firming livestock prices. Photo: Elders

REBOUNDING livestock prices are anticipated to inject much-needed strength and confidence into the rural property market before the coming spring.

In this week’s property review, a number of leading agents share their perspective on the current state of market play.

Rawdon Briggs, Colliers Agribusiness

Rawdon Briggs

Rawdon Briggs is the head of Colliers’ Agribusiness Transaction Service.

He said the 2024 spring selling season will be the highest volume of on market listings in a decade.

“I am anticipating a strong pipeline in the third and fourth quarters of 2024,” Mr Briggs said.

“However, listing is one thing and selling is another matter, and only well-prepared and well-presented properties and agribusinesses will sell without some downside price risks.”

Mr Briggs said the Colliers team has noted a significant increase in “request-for-proposal” activity by various vendors in June and July.

“Listing numbers are a mix of succession-planning events, trimming the portfolio, corporate owners selling at end-of-fund-life assets, more timely restructuring, and turnaround sales appointments from banks and non-bank lenders.”

Mr Briggs said the restructuring property services team at Colliers is the busiest it has been since 2010 and 2013, the ripple effect following the live export shutdown and the global financial crisis.

“Leading restructuring firms are dispatching request for proposals to recover the debt positions or assist equity partners to resolve a dispute on behalf of their clients acting for the mortgagee or partners.”

Mr Briggs was quick to point out that restructuring is not necessarily receivership.

“It could be a turnaround situation where voluntary administration has been called early by the vendor.

“This means they are choosing a restructuring path via a debt mediation or a sale process to manage their creditor position instead of waiting for a less favourable situation to come along.”

Mr Briggs said several factors were working against companies with high debt levels post the 70-year low interest-rate climate experienced around and post COVID.

“Several commodity prices fell by between 30 to 40 percent and while they have recovered, they are still around 25pc lower than 2022 levels, reducing revenue or gross margins for all producers.”

“In addition, most agribusinesses experienced a cost of production spike over the past two years due to higher labour, chemicals, packaging, transport, export fees and other input prices. This has increased business costs by around 15 to 20 percent.”

Mr Briggs said when bond yields between US and Australia widen in Q3 then the AUD/USD could turn against all export-focused businesses including producers, with some commodity prices likely to come under renewed pressure.

Mr Briggs said given the recent US events, exchange rate movements are highly probable later in 2024.

“I am predicting a disaster or ‘black swan’ event, but our fundamental commodity market conditions and logistics are not the same as they were.”

Buyers

Mr Briggs believes the current market conditions are slowing family farm expansion, which has dominated the market in recent years while debt markets were favourable.

“Today, the institutional and corporate buyers are in the best position in 15 years because they have time to close and settle now.”

Mr Briggs said when it comes to selling a significant rural property for any owner, there has been a swing away from smaller individual agencies who do everything.

“Vendors understand the risks of not appointing a property specialist agency team because reaching into these dominant buyer groups (institutional, corporate, high-net-worth individuals or family office buyers) has become more important in these times of restricted capital.”

Mr Briggs cited Cottonwood Ag Management as an example, controlled by the Bill Gates family office farmland fund.

“While Cottonwood is not about to enter our market again, there are other family offices looking to place capital with existing farmland managers or complete initial direct investments from the Asia-Pacific (APAC), Europe, the Middle East and Africa (EMEA) and the Americas – especially while the Australian dollar is low.”

“Some of these participants are investing into debt and equity vehicles which provide our clients with more options,” he explained.

Prices

Mr Briggs believes these factors will slow or steady property growth and will ultimately increase ‘time on market’ to achieve vendors expectations.

“What is needed is a new commodity price high, above the 2022 levels, or a significant interest-rate cut to fire the debt markets again.”

A word of advice from Mr Briggs to potential vendors is to be prepared months in advance of listing, and that well-presented properties are absolutely saleable.

Matt Childs, CBRE Agribusiness  

Matt Childs

In the latter part of 2023, CBRE Agribusiness agent Matt Childs said the volume of inquiry reduced following reports of the Bureau of Meteorology’s forecast for drier-than-normal seasonal conditions which did not eventuate.

“The drop in livestock prices created a subdued market but now they are gathering momentum,” Mr Childs said.

“It is too early to determine what impact rebounding livestock prices will have on property values, but they will certainly generate more confidence in buyers and lending institutions.”

Mr Childs noted three strong years behind most producers.

“There is still plenty of appetite for expansion, but producers and bankers will only spend if livestock prices remain at, or above, current levels.”

In terms of what CBRE Agribusiness has listed and will potentially list, Mr Childs said spring is always the busiest time of year.

“I wouldn’t suggest there are any more listings than normal but the types of properties we will be managing are quality assets.”

Mr Childs said sales and divestments are being driven by a number of factors.

“A number of 10-year investment cycles are turning over, there is family succession or a lack thereof, and some operators are downsizing or retiring.”

In terms of where prices are headed, Mr Childs said it depends on the quality of the asset.

“Given what has occurred in livestock pricing in recent weeks, that should bode well in terms of competition.”

“On the other hand, there is unlikely to be the volume of competition for C-grade assets that fail to offer versatility, development and value-adding opportunities.

“However, it doesn’t mean those properties won’t sell.”

Mr Childs said a hike in interest rates is unlikely to significantly impact buying and selling activity.

“Higher interest rates may subdue spending activity, but most producers understand they will remain at around current levels for some time.”

Mr Childs said if banks and lending institutions have confidence, producers can usually access funds.

“A-grade assets that are rarely offered to the market are typically snapped up regardless of seasonal or economic conditions because they are often viewed as a once in a lifetime opportunity.”

Mr Childs said the property market is witnessing an increase in domestic and overseas corporates, family offices and institutional investors.

“The scale of farming, or what is required, is growing and ultimately that means more corporate investment opposed to family farmers.”

When considering listing an asset, Mr Childs urged potential vendors not to rush preparation.

“Taking a property to market needs to be planned well in advance.

“Ensure the timing is right in terms of property presentation and competition. Spring is a time when many properties are listed for sale, so either beat the rush or wait until it is over.”

Brian McAneney, Elders

Brian McAneney

Dubbo-based Elders agent Brian McAneney has been a keen watcher of markets and has recognised a correlation between the property market and in particular, cattle prices.

“Strength and confidence in the cattle market typically flow through to strength and confidence in the property market, and the same can be said for the sheep and grain markets.”

Mr McAneney blames the recent lack of confidence in the property market on badly performing protein markets.

“Lambs that were making $260 a head dropped to $130; today, they are making more than $8 a kilogram, cow prices have risen from $2/kg to $3/kg and fat steers and store stock (weaners and lambs) are achieving good returns,” he said.

Mr McAneney said higher commodity prices are fluttering the flag.

“They are giving clients confidence, boosting balance sheets and driving the property market. I believe producers can achieve their budgets when protein prices are at the right levels and that is what banks want to see.”

Mr McAneney said there is a saying that “one swallow doesn’t make a summer”, but that did not ring true in his neck of the woods.

“In central western New South Wales, five properties have sold, one after the other, at auction under the hammer, on top of other transactions, demonstrating strong confidence from Brewarrina to Ballimore and all points in between.”

“These places haven’t all been blue-ribbon properties situated on a river, although some of them have.

“One was located between Coonamble and Baradine, and another was a dryland mixed farm near Balladoran.”

Mr McAneney said he never has enough new listings coming on to the market.

“We are actively speaking with potential vendors, but it can take two or three years before some producers are ready to list.

“The average age of my clients is 62 and most are considering family succession or retirement.

“Largely, in the marketplace we deal in, existing families with expertise and labour are looking to expand.”

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