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NZ Dairy Farm sales - on the up again

Rural

Property Brokers 08 Apr 2021

Blog image_Conrad Wilkshire_SpringWe continue to see strength returning to New Zealand's rural market, particularly with dairy farm sales in 2021, and this is mirrored in Property Brokers' sales performance too.

Our successful late summer sales program has almost cleaned out our inventory of available 2020 dairy listings, given most have either sold or are under contract.

Fortunately, our 2021 autumn sales program is bringing new farms to the market and we are now actively seeking new dairy listings for the spring too. Given we are in the business of selling farms, this probably does not come as a great surprise. What might surprise you is that sales are up by both value and volume.

This market confidence is more than a dairy pay-out story because while that has been going up for the last 3 to 4 years, farm values have, until this season, continued to drop.

2021 continues to see a raft of broader market signals in support of our dairy sector, including a more measured central government approach to environmental planning, favourable credit re-ratings of rural dairy debt, as well as a general recognition of the work in support of sustainable New Zealand dairy production, reflected in excellent international rankings.

Importantly, buyers who have been actively searching for value are now able to buy dairy farms at a return well ahead of the cost of finance. So the new additional dairy farm is invariably adding value from day one and is not dependent on further capital expenditure and a lot of hard yards to achieve ‘potential’.

ln recent seasons, many of our buyers have been reluctant to close what has often been very modest ‘gaps’ in valuations per hectare on the buy/sell. Typically, a market confidence issue. We are now seeing the confidence to operate again as the returns stack up. Those who had the courage (and support) to step up over the last
12-months stand to benefit from their decisions both in terms of cash flow returns and valuation.

On the topic of valuations, I thought we should include a couple of tables on New Zealand dairy farm sales through to February 2021. The first illustrates the rolling 12-months dairy sales to February 2021 is now $729m which is significantly up on the same last year ($500m). The number of dairy farm sales successfully taken to the open market is significantly up too, from 110 to 170 sales annually.

The second table shows national monthly dairy farm sales for the last 12 months, the national median dairy farm price for February 2021 was $35,200/ha up from $32,600 on the rolling 12 month average (table 1). A word of caution, relying on the national median for your own farm can vary a lot month to month — particularly on light sales volumes. So, it is an index — it is not perfect hence why we tend to look at both the month and how the rolling 12-month period is going. It is our expectation that values have bottomed for dairy sales nationally and the 12 month rolling median price per hectare will steadily appreciate over next season, on current trend.

 

The best advice l can offer is to talk to our local rural Property Brokers specialist. As a Farmlands shareholder, we will be placing a real priority on providing you with no obligation local market updates through the autumn and winter months. This can include advice on all aspects of the provincial property market. Please do not hesitate to reach out and contact us or visit pb.co.nz.

Lastly, a big welcome to our new Southern Wide Southland team, who like Farmlands, have joined forces with Property Brokers to provide the best possible nationwide service in support of rural and lifestyle real estate. This proven team brings a wealth of knowledge and experience in the Southland market and we are excited to have them on board.

Conrad Wilkshire,
GM Rural for Property Brokers Ltd