What price a dry sheep area?

This Boorowa district grazing property, “Wiruna”, sold through CBRE last month at $2.15m, or more than $530/DSE based on its estimated stocking rate of 4000DSE.ANY investor looking at buying into the rural property market today for the purpose of running sheep will need much deeper pockets than they would have needed three or four years ago.
Nanjing Night Net

Back in 2014, improved grazing country in higher-rainfall areas of NSW and out of the valuation “orbit” of a large town was selling in a general range equivalent to $300 to $325 a dry sheep area (DSE).

If you didn’t mind taking a greater seasonal risk, you could have headed into the state’s low-rainfall western pastoral country and bought good land for less than $200/DSE.

Anyone who did buy at that time would now be congratulating themselves on their canny sense of timing, as land values have climbed to new heights in the wake of a dramatic lift in markets for livestock and wool, and a seasonal turnaround.

Agents now talk of a general range of grazing land values from about $350 to $550/DSE, and there’s been a narrowing of the geographical gap that previously existed in DSE values from one place to another.

Chasing yieldAs principal of Sydney-based rural property agency Meares and Associates, Chris Meares, puts it, buyers now are “all about yield”, rather than the desirability of an address.

“They want to be able to see a profit when they crunch the numbers – even if it’s only a return to capital of two or three per cent (excluding capital growth),” he said.

And according to CBRE’s Colin Medway, this has been reflected in a recent spate of sales of tablelands grazing properties at prices “north of $500 a DSE”.

He said such prices could be readily justified, as any “reasonable” grazing business in this zone was now generating EBIT returns of more than $25/DSE – or 5pc on a land capital outlay of $500/DSE.

That compared with a price range of $400-$425/DSE 18 months ago, and $300-$325/DSE three years ago.

Rising valuesLandmark Harcourts’ Sydney-based corporate sales manager, Phil Rourke, sees a similar trend, whereby properties previously sold at prices equivalent to around $380/DSE would now fetch close to $500/DSE – a rise of 25pc.

In areas of the state less favoured by investors (mostly because of their distance from a major centre), he said the market was being driven by neighbour-to-neighbour demand, with similar price effects.

At Merriwa in the Upper Hunter, Huw Llewelyn of G.M. Llewelyn and Company said hilly grazing country had risen in value by 35-40pc in two years, or from around $300/DSE to more than $400/DSE.

And in the Central West, Peter Dwyer at Peter Milling and Company, Dubbo says grazing-oriented properties which were selling mostly below $300/DSE three years ago are now trading at $425-$480/DSE.

Lower-cost country in demandEven at Bourke, according to Landmark Walsh Hughes manager Greg Seiler, buyers must now expect to pay up to $500/DSE for best floodplain country, and $300-plus for improved red country.

Country in lower-rainfall areas further north-west, or less improved, could still be found at prices below $300/DSE, but well above their 2014 levels of less than $200/DSE.

“Values have risen by 25 to 30 percent here in the past 12 months, mostly driven by local demand, but also by ‘inside’ country inquiry for lower-cost breeding country,” Mr Seiler said.

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