Vineyard values expected to grow as transactions increase

08 July, 2019 by Andy Young

The growth in popularity of Australian wine, especially in key export markets is expected to drive strong growth in vineyard values according to valuers at Colliers International.

In its Agribusiness 2019 Research and Forecast Report, Colliers International said it is expecting higher volumes of property transaction and high interest from overseas investors, particularly Chinese capital.

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“The Australian wine industry is showing strong growth after a challenging decade. Based on the current outlook, the industry is quickly approaching a point where demand will outstrip supply,” the report states.

“This has translated into significantly higher volumes of property transactions. Buyer enquiry has focused on vineyards offering scale and efficiency or premium quality fruit. Larger producers are also offering three and five-year grape supply agreements in an attempt to secure supply and mitigate rising fruit prices.”

In terms of where the vineyard investment is coming from, Colliers International said that overseas investors are targeting Australian vineyards and wineries.

“Foreign investment has been particularly newsworthy over the past 24 months. Investors from Asia, UK, North America and New Zealand have been involved in prominent acquisitions in Australia’s premium wine producing regions,” the report said.

“We have seen this segment of the market focus on premium and super-premium assets in recognised wine areas with small to medium wine companies in the $2M+ to $20M range appearing to be more attractive.

“Recent sales suggest that the market is now prepared to pay a premium for vineyard and winery assets which support established highly regarded wine businesses. The Barossa Valley has been the focus of the upsurge in demand. We cite three examples: Greenock Creek Wines, Hare’s Chase Wines and Burge Family Winemakers, which Colliers International Agribusiness sold to Chinese entities.”

Strong exports of Australian wine to key markets including the UK and China have helped drive the demand to invest in Australian wineries. The value of Australian wine exports grew by 20 per cent to $2.76bn in 2017-18, the highest rate of growth for 15 years, according to Wine Australia’s Export Report for the year ended 30 June 2018.

The Chinese market, including Hong Kong and Macau is by far the biggest market for Australian wine exports and it saw a stunning 55 per cent increase in 2017-18, going up to $1.12bn.

In outlining its industry and property outlook, Colliers International said: “We observe continuing interest from overseas investors in Australian wine industry assets, particularly for premium assets, on the back of continued growth in the value of wine exports. Proven domestic industry operators are increasingly active. We expect this will increase competition for credentialed assets.

“Generally, less favourable growing conditions in South Eastern Australia will lead to a smaller 2019 wine grape crop compared to 2018. This will increase demand for wine grapes and place upward pressure on fruit prices and vineyard values.

“On a macro industry level, property values are at last showing signs of growth in both vineyard values and in wineries in key locations.”