Breeders betting on demand continuing are well-placed to make big returns
Booming bloodstock sales underline increased interest in racehorse ownership, says economist
Do the extraordinary numbers paid for bloodstock in 2021 stack up? Or will there be blood on the floor if, and when, there is a correction of the Australian thoroughbred market in the years to come?
That is the question being pondered by many experienced industry figures after the Magic Millions National Weanling and Broodmare Sale, who say this week’s “frenzied” activity was something never seen at a thoroughbred auction anywhere else in the world.
Breeders betting on the driving forces behind the insatiable market demand for racehorses continuing at least in line with the prices for stock this year have the odds in their favour, a leading Australian economist says.
Managing director of Market Economics, Stephen Koukoulas, a former chief economist at Citibank, believes the stunning trend is here to stay for the foreseeable future after observing what has occurred at this year’s sales series.
“My answer is, yes, because once you’ve got a taste for it (racehorse ownership), you tend to keep going,” Koukoulas told ANZ Bloodstock News yesterday.
“There’s an annual report that Racing Australia puts out. I had a look at it a few months ago and it shows the number of owners.
“OK, you’ve got the Gerry Harveys and the John Singletons and these guys who are extremely rich and can buy whatever horses they want, but if you look through the ownership numbers, there are people, like me, who have reached mid-life, a little bit beyond, they’ve got lucky in life who, I won’t say have a huge amount of cash, but occasionally they will buy a five per cent share here or there and the ownership numbers have gone up, so to me that suggests that there’s a bit more (demand) to come.”
The figures cited by Koukoulas show that 82,311 owners had a horse race last season in Australia, while another 40,804 were involved in ownership through a syndicate and he expects those numbers to increase year-on-year.
He shares the view expressed by many that racing has benefited from the closure of the international borders, leading to people finding other ways to spend their discretionary income.
“This is a very generic comment, but people who may have spent $20-$30 grand on an overseas holiday, business class to Europe and a month travelling around France, Spain and Italy and all the rest of it, all of a sudden have that money sitting in the bank now,” Koukoulas said.
“Their house prices have gone up in value, so they are feeling wealthy and the stock market’s recovered (to a record close yesterday), so the fear of the stock market falling away rapidly is no longer there and now they have the feeling of, ‘I’ve always wanted to buy a share in a racehorse’.
“The racing industry kept going through thick and thin during lockdowns a year ago and, of course, they are still going on, so I think it is all feeding into the market.
“They’re spending their money at home and keeping it at home and, as I said in the case of ownership rates of horses, it’s obviously spilling over to the breeders (who are reinvesting).”
At this month’s breeding stock sales conducted by Inglis in Sydney and the Magic Millions National Weanling and Broodmare Sale, a total of $182,391,600 has been spent on mares and another $40.39 million has been spent on foals.
The Inglis Great Southern Sale, featuring 408 weanlings and at least 125 broodmares, is still to be held in Melbourne on June 13 and 14.
Prior to the opening National Broodmare Sale session, Attunga Stud’s Brian Nutt told his clients they were “selling at the top of the market” while Cressfield Stud’s Bruce Neill, after paying $1 million for Quilista (Scandal Keeper), said: “There’s a lot of reinvestment going on around the world with asset classes. Obviously, we are in that category with the horse industry and it’s very encouraging.”
Koukoulas, himself a racehorse owner and punter, says other industries are also experiencing a massive upswing in demand in a similar way the gambling sector and racing industry has in the past 15 months.
“The beauty industry has been booming during the downturn and recession, and it’s predominantly the women who buy the lipstick and things. It is booming because people want to feel good during these down times. It is an interesting phenomenon,” he said.
“There’s a link between those spending on cosmetics and perfume and those sorts of things, which is predominantly women, and predominantly males, I suppose, are buying shares in horses. A lot more women are buying into horses now, too, but it is still predominantly a male industry.
“‘I can afford to do it and I want to have a feel-good experience’ and having a share in a horse who is running around is a very, very exciting thing.”
He added: “Again, another funny link is the car sales. ‘I am feeling OK with my money, so I am going to buy myself a fancy new car’. We’ve seen that with new car sales, where there was almost none of them being sold and now they’re struggling to keep up with demand.
“Big-ticket items like cars are very expensive and a share in a racehorse is clearly very expensive for ‘spare cash’, but I think that momentum is continuing because the economy is still doing well, interest rates are low and people are feeling wealthy.”
Magic Millions managing director Barry Bowditch, speaking on Thursday after the last lot was sold at the company’s most successful National Broodmare Sale in which 611 lots sold for a total of more than $142 million, does not expect a so-called correction any time soon.
“(The broodmare sale) mirrors what’s happening on the racetrack here,” Bowditch said.
“There’s a lot of confidence here, our model is so strong and so robust, our prize-money’s fantastic and people want to get into the game at all levels, whether it be breeding, pinhooking or racing, so I’ve got a lot of confidence where we’re at I think we can continue to go from strength to strength.”
Koukoulas is clearly an industry convert but he firmly believes the long-term outlook for racing is a strong one in Australia.
“Having been under a lot of pressure with the welfare issues around the Melbourne Cup and horses being sent off to the knackery, there was some really bad PR there and there were some bad things that happened – I am not denying that for a second – but maybe people are thinking, ‘OK, the industry’s got its act together on these things and I want to be part of it’,” he said.
“It’s the social thing of owning a share in a horse that is exhilarating. The fact that we are locked down and we want to spend our money on something.
“It’s a mid-life crisis for a lot of us, so if you’ve always wanted a share in a racehorse, here’s your opportunity.”