North and North West Queensland grazing property market primed for a make or break 2020: HTW rural

The 2020 north and north-western Queensland grazing property market is certainly primed for a make or break year ahead, according to the recent Herron Todd White (HTW) report. 

The property valuation firm suggests grazing property market commentary has been mixed.

On the one hand, there are some who are looking to expand in these market conditions on the back of low interest rates and confidence in cattle prices in the next five year.

On the other hand, there are those who believe that once it rains down south, the demand that drove the 2018 market pricing will dissipate, values may languish and market demand and pricing may change within weeks. 

It appears that major demand factors in the recent year have been from southern graziers seeking higher rainfall and grassed areas, southern farmers taking a risk to establish northern dry land farming projects, positive producer sentiment as cattle prices are expected to rise, low interest rates, and Commonwealth acquisitions in the Greenvale and Charters Towers area. 

Source: HTW rural report, North and North West Queensland

HTW's graph "shows a cross section of 2019 sale parameters, excluding cattle and plant and equipment, that shows the contrast in market pricing between downs and forest country. 

"Downs country values increased from 2018 to 2019, however 2019 really was the year for the forest country types. The market for forest country outshone the downs for once."

"Typically, downs country reflects stronger hectare rates to the forest breeding. Given the strong demand and offerings of mixed to top quality basalt country, the forest country has come through and toppled the downs." 

"Sale hectare rates for mixed quality to top quality basalt country in the Charters Towers and Greenvale areas achieved similar hectare rates than the downs last year", except in the cases of Reedybrook and Marionvale which achieved stronger rates.

The report warns that it "is time to be careful and calculating of the risks in buying or selling cattle stations at this stage of the property market cycle."

HTW observes that a few market comments have started to surface which have not been around since about 2006 to 2008. 

"These were bullish comments then and are indicative of confidence rising now. For some, their investments worked. For others, bullish expansions results in unfortunate situations.

"Perhaps the variance in outcomes arose from calculated due diligence processes for the successful manoeuvres as opposed to emotional acquisitions that stretched all available resources."

For example, a classic comment that has recently surfaced is, "We need to buy Johnny a property now because property values are rising. John is old enough for a property now and we will never get the opportunity again!" 

HTW suggests that the resurfacing of such an emotionally driven reason to buy a property is a reasonable indicator that market sentiment is getting up there. 

However, at this stage, emotionally driven buyer transitions have been minimal. 

Strong southern buyer demand influence last year informed potential local buyers what price point reflected their highest bid point.

This indicates "local buyers are doing their homework at this stage of the cycle. They have calculated the price at which they can be profitable and successful."

HTW notes that "should southern buyer demand dissipate in the ensuring months, vendors too will need to be prudent. 

"It may be that in the absence of southern buyers, asking for a price increase on 2018 values may not achieve a successful sale."

HTW advises, "in this stage of the market cycle, both buyers and vendors need to be prudent."

Overall, with cattle prices looking optimistic and interest rates low, graziers are looking to grow and expand their operations.