North west floods: grass will help land hold its value

Herron Todd White north Queensland director, Roger Hill, made the assessment, describing it as a unique position to be in, in that the north west may be one of the few places in Australia with grass in months to come.

"Despite the impact on cattle numbers in the north, demand from southern and western graziers for agistment is increasing," he said.

"Agistment is only one option being discussed. Others include leasing, profit share and delayed payment for northerners to acquire the cattle.

"Either way, the opportunity for the land to generate income is there."

Roger referred to Brisbane unit prices following the 2011 flood, where the sale volume was such that buyers could enter the market at a substantial discount, up to 30 per cent in some areas, and capitalise on market recovery over time.

But he said his company had also noticed with reflection that grazing land values, as opposed to cropping land, were not as affected by the flooding that year in the Toowoomba region.

"You certainly need risk awareness when valuing the effect of scoured out land and tussocks that have been ripped out, such as what I'm seeing in some places in the north west," he said. "You mightn't be able to use that specific country for a year or two but it's probably affecting 1pc of an overall property."

While noting the north west grazing property market had a much lower volume of sales from year to year, Roger assessed potential market efficiency, or how quickly and to what degree the market repriced an asset based on new information, in two sections, north and south of the Flinders Highway.

"The area to the north of the Flinders Highway is tightly held," he said.

"It has moderate to high levels of grazing productivity. The local market knows this and the investor market knows this.

"Should an opportunity arise to acquire a cattle property in this area, if the first person does not pay a prudent asking price then the second will."

Current grazing land value rate ranges for small to mid scale stations are from $308/ha to as high as $495/ha for frontage country.

Roger said Mitchell grass germination had been good in areas south of the Flinders Highway and time would tell what the grass budget looked like, as well as how much Flinders grass grew.

"This mix of grasses provides opportunity for central Queensland, southern Queensland and Northern Territory graziers until such time as seasonal conditions improve in their home districts," he said.

In addition, the varied seasonal conditions in recent years meant some graziers were ready to exit, and so sales could be expected.

According to Roger, existing value rates range from $260/ha to $345/ha for country with channels.

Emphasising the minimal effect the natural disaster is expected to have on property values, Roger said the effect was felt primarily on businesses and infrastructure.

"Yes, infrastructure is part of a property, but even if a vendor throws his hands in the air and sells with no infrastructure, then the market is not efficient enough to say if there is any diminution of value of even 5 per cent  to 10pc in the short term," he said.

In the last property cycle, using the northern central Downs as the most efficient market to depict the trend, Roger said the post-GFC softening of values, thanks to the live export temporary ban and drought, had given way to rising values in recent years.

"The cattle market peaked in September 2017 and there has been a 30pc softening in the commodity rate, thanks to drought since then," he said.

"The market has been confident that once a traditional wet season occurred, the cattle market would recover from its drought affected position.

"Contrary to the commodity trend, the market increased its value rates for the underlying grazing land. Confidence in the industry and its future was showing.

"Depending on the season this summer, land values were generally expected to continue to rise into 2019."