Plenty of bargains in the bush

08 Jan, 2013 01:00 AM
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12
 
Farmers with conservative balance sheets will find themselves in the box seat with an opportunity to pick up discounts on non-distressed rural property at prices similar to distressed levels.
Farmers with conservative balance sheets will find themselves in the box seat with an opportunity to pick up discounts on non-distressed rural property at prices similar to distressed levels.

FIRE sales and bargains will dominate the rural property market this year as pressure builds to sell trophy farms and prized commercial operations.

Farmers with conservative balance sheets will find themselves in the box seat with an opportunity to pick up discounts on non-distressed rural property at prices similar to distressed levels, The Australian Financial Review reports.

A report by insolvency firm PPB Advisory has indicated that the price differential between distressed and non-distressed farming properties is minuscule. PPB found that receivership sales over the past 12 months were able to achieve 93 per cent of the total independent market valuation.

"This shows that there is no significant difference between a receiver's sale and a normal vendor sale of rural property in the current market," said PPB agribusiness partner Greg Quinn.

But Mr Quinn expects more pressure on values this year. "We are concerned that there is further room for downward movement," he said.

"There has already been a significant volume of rural property on the market, which has resulted in values in some regions falling by 20 per cent and as much as 30 per cent."

Many in the industry expect greater volumes of receiver stock in the $1 million to $10 million price range to hit the market this year.

Charlie Blomfield of Agricultural Management Company, who provides management and advisory services to banks and receivers, said 2012 had been his busiest year on record and, depending on global credit conditions, 2013 could be even busier.

"Australian banks seeking offshore funding could see higher borrowing costs and may look to reduce exposure to troubled debts. This could lead to more banks crystalising losses through 2013 and 2014," Mr Blomfield said.

"Domestic banks seem to be reaching a point where the requirement to reduce exposure to poor quality loans and the cost to maintain them exceeds the time required for a work-out plan."

Ernst & Young's Justin Walsh agreed more agricultural properties would come onto the market.

"There is a level of concern from some financiers around agriculture which is not dissimilar to the concerns many of them had around real estate before the meltdown in the global financial crisis," he said.

"Rural properties experienced the same dramatic price increase largely fuelled by debt."

The distress in the rural market is not specific to a particular geography or sector but to those properties where there is financial pressure.

Kingower, a well-known family-owned cotton farming property in Emerald, Queensland, has just sold for about $5 million in a deal brokered by Bruce Douglas and Russell Wolff of of Ray White Rural.

The 3300-hectare property, which was in the hands of receivers Ernst & Young, was bought during the boom for more than $10 million.

While commercial farms are taking a hit, discounting has also spread to lifestyle rural properties, even when there is no distinct financial pressure.

The 115-hectare Normanby Homestead, less than an hour's drive from Brisbane, sold for $1.6 million a few days before Christmas.

The property, including a beautiful five-bedroom renovated homestead with ornate fretwork and 3.6-metre high ceilings was being marketed for $3 million. It has two dams and a 70 megalitre water licence. It was not in receivership.

Ray White's Barry Quinn, who sold the property, said while the pricing was soft, there had been 140 enquiries and 80 official inspections.

The next big trophy farm likely to come onto the market is "Jondell" – a distressed 158-hectare macadamia farm with a palatial five-bedroom, four-bathroom residence in the Noosa hinterland.

The property is in the hands of receivers McGrath Nicol and market sources expect it to fetch about $5 million.

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The Australian Financial ReviewSource: http://www.afr.com
Date: Newest first | Oldest first

READER COMMENTS

Tigerdicky
8/01/2013 3:48:52 AM

Overseas carpetbaggers, apply only!
The Serf
8/01/2013 12:42:20 PM

And these prices may well prove, in the scheme of things, to be still too high; for too long the value of rural land has not reflected the profitability or even earning capacity of that land; in the cattle industry it has lost about 50pc of its terms of trade in the past 20 years but land values have gone through the roof, this has to change and we are now seeing reality in the making.
Bushie Bill
9/01/2013 5:55:41 AM

So the message is clear for all dud farmers: sell now taking advantage of unjustifiably high prices and, at the same time, increase the productivity of agriculture by selling to people who know what they are doing, and invest your unjustified capital windfall in more rewarding ventures. Wins all round, with the added bonus that there also may (not guaranteed) be less whingeing from fewer whingers the cork swinger fraternity.
UFDHBB
10/01/2013 4:55:23 AM

Why are these prices so unjustifiably high,Bushie Bill?
Fairgo
10/01/2013 10:49:56 AM

Bushie Bill - Why are the prices of agricultural land “so unjustifiably high” and what specific type of land are you referring to? Are you referring to dry country or irrigation properties and what DSE ranges are you referring to? Also where are the “dud farmers”? I thought Australian farmers had a reputation of being the best in the world with the challenges they face and the little or no help they receive from the government when compared to other countries. The Serf - Have you looked at the price of rural properties in Australia compared to other countries recently?
Ian Mott
11/01/2013 10:05:09 AM

Another windbag talking through his hat. "Australian banks seeking offshore funding could see higher borrowing costs and may look to reduce exposure to troubled debts". In fact, my banker is predicting at least another 60 basis points drop in interest rates. And much of that will not be from RBA cuts. The difficulty the banks had in attracting foreign funds is passing as the Europeans, in particular, have come to realise that investing in Aussie dollars allows them to effectively switch funds from the US to China without any of the Chinese sovereign risk.
Bushie Bill
11/01/2013 3:35:01 PM

Read the article, bozos, and you won't need to ask me unnecessary questions.
UFDHBB
14/01/2013 6:53:32 AM

Quite clearly you don't even believe your own bulldust, Bushie Bill.
Fairgo
14/01/2013 7:51:14 AM

Bushie Bill - The 'questions' were in response to 'your' statements and what is missing in the article.
Bushie Bill
15/01/2013 8:55:10 AM

Do you lot have a problem with English?
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