A LACK of mid to large-scale cattle stations in northern Queensland is presenting opportunities for sellers, says Herron Todd White valuer Roger Hill.
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Writing in the monthly Herron Todd White report, Townsville-based Mr Hill said is was a pretty good phase of the market cycle to offload an asset.
“This does not mean that it’s time to be greedy; buyers are not that euphoric or naïve,” Mr Hill said.
“There is a lack of mid to large-scale cattle stations on the market at present.”
The free market can either price in rational growth or make history and enter boom territory.
- Roger Hill, Herron Todd White
Mr Hill said the ball was in the seller’s court to make the decision to sell a station or hold.
“This can be a tough decision, particularly when there is the potential for achieving a higher price in the year to come.”
Changing times
Mr Hill said the toughest phase of the decade was confronting the property market.
“In the post GFC market, potential property buyers sat down, diligently prepared budgets and considered the business fundamentals of potential property acquisitions,” he said.
“There were some moderate capital gains despite the below average seasonal conditions.”
However, the due diligence dynamic had now changed, he said.
“The market has the potential now to change gears,” Mr Hill said.
“Up until now, the general market commentary has accepted the motivations as to why a purchaser has paid a certain price for their new property.
“No matter if a reasonable price or strong, the market has accepted the reasoning, then rationally moved on and taken these sales in its stride.
“This may change. Despite the steady value increases in recent years of say five to 10 per cent, the perception of a strong price can be anywhere from ten to thirty per cent higher than existing market parameters.
“Earlier this year, local buyers were paying prices in accordance with existing market parameters. Then, for a while there was the odd southern buyer paying a higher price to secure some grass.
“You might think that this is elementary market dynamics. Yes, the southern grass buyer story has been flogged around more than a 1970s vinyl on the record player.
“The choice now of the local buyers to pay such a premium is where challenges for the market arise. This is a phase of the property market cycle where the free market can either price in rational growth or make history and enter boom territory.”
Buyer scenarios
Mr Hill said there are a number of different buyer scenarios emerging:
- Local grazing families that had spent the past 10 years consolidating balance sheets and lowering risk. Some have sold assets to reshape their balance sheets, others have paid down debt.
- Local graziers seeking replacement stations as a result of one of their stations having been acquired. For example, negotiations were continuing in the Greenvale area for the Singapore Alliance military training area.
- Southern graziers seeking lower cost country to breed and more reliable seasonal conditions.
- Southern graziers who have had country acquired seeking replacement opportunities.
- Investment vehicles seeking to capture favourable returns. Now that southern country has increased in value, percentage yield returns have dropped, making the north look attractive until yield compression kicks in again.
