This article is from the Australian Property Journal archive
THE Australian agricultural property sector is on the road to recovery, thanks to firm commodity prices and good seasonal conditions, according to Colliers International.
The National Rural & Agribusiness Research Report found that general sentiment across the sector had improved, but overall market activity had yet to lift in response.
Rural & Agribusiness for Investment Services executive director Tim Altschwager said whilst the short term outlook for the forestry sector is somewhat uncertain, some stabilisation has returned to the wine sector and assets are beginning to move again.
“This is a very big shift in sentiment,” he declared.
“Market conditions are beginning to smooth out and with recent wine supply figures’ indicating that balance is being restored with supply and demand moving closer to equilibrium, the overall the outlook has improved.
“The international markets will still be a factor over the short term and the strength of the Australian dollar will also continue to impact the investment market,” he added.
Altschwager said there are major buying opportunities across most segments which have attracted interest from both domestic and offshore investors.
One sector which has seen activity return is pastoral/livestock with more than $120 million worth of major holdings changing hands since the beginning of the year.
“There is real value in the market at the moment and although some uncertainty still exists, especially in the global market, capital flows here are showing signs that this sector is coming off the bottom,”
Altschwager said values have stabilised and there are few distressed sales now occurring with the majority of property being exchanged in this segment coming from the private sector. The buyers are a combination of existing industry participants, institutions and offshore investors and there are still a number of significant offerings in the market which will influence the outlook for the sector over the short term.
“Given the size of these assets, which include Clyde Agriculture and Carrington Farms, are north of $300 million, we don’t expect any results here until at least 2011,” he added.
Report author and research manager Katy Dean said until mid to late 2007 the rural property sector had experienced significant growth with numerous buyers both domestically and offshore fighting it out for the limited opportunities across Australia.
“Land values in particular grew significantly during the last decade but eventually dry conditions across many parts of Australia and the compounding effects of the GFC in 2008 saw buyer interest fall back and the volume of forced sales increase substantially. This impact was adverse.
“While 2010 has still seen a number of distressed assets come through, prominently profiled within the forestry and wine sector, more vendors and financiers have held back assets waiting for an improvement in overall market conditions,” she added.
Dean said pressure remains on prices but buyers are now seeing the value-add opportunities on offer and as a result, market activity and overall sentiment will continue to improve moving in 2011.
But Altschwager said the recovery is not across all rural segments, with forestry and the wine sector still struggling. Most of the major MIS companies have collapsed and there are still some distressed assets coming to the market from the wine sector.
Australian Property Journal
