NZ pastoral real estate now affords the best value for money in a generation, and that was pre-COVID-19.
Nationally on the most recent REINZ data to end of March, the total number of NZ pastoral annual farms sales are back 18% by number at a 1000 sales, and the pastoral farm market by value is back 28% at $2.2b on the prior year.
The dairy property market has been a significant influence in these results with the median dairy sale price
per hectare to the end of March having dropped 18% from $37,100/ha to $30,300/ha and the REINZ Dairy
Farm Price Index back 13% year on year. Nationally the number of dairy farm sales is tracking at less than
a 100 for the current 19/20 season to June and March to March stands at 108 for the year, half the number
seen a couple of seasons ago. What is most interesting is that while dairy farm sales have been trending
down year on year, dairy farm gate returns have been trending up! No less so than this current 19/20 season
with a forecast pay-out of $7+/ kgms.
Much will be made of COVID-19 and its massive impact on the economy going forward, and it’s likely that
NZ’s rural property market will be captured in all of that commentary too, when in fact it’s not the case. The
rural property market has already worked through a significant market adjustment, anybody now looking to
associate COVID-19 supply chain interruptions to it, probably didn’t read the tea leaves clearly ahead of this
event. The real issues presenting in our rural property market are the continuing sinking lid policies targeting farm gate rural debt and the absence of sufficient equity funded institutional buyers.
NZ farmers are realists, the rural real estate market by any definition has already reset, operating currently at GFC levels by value and volume of sales. Farming is a long term investment play, and lately, the risks have been over-sold and farmers looking to sell, have had to wear the brunt of that.
In real terms, the underlying sustainable farming returns now compare very favourably with other sectors and
should and will attract future investment interest. We should not lose sight of the fact that returns per hectare
from productive well managed, sustainable dairy systems, remain head and shoulders above the alternative
pastoral land uses. So, current market sentiment has created significant opportunities to capture real value in
the dairy sector, including this autumn.
The economic impact of COVID-19 will go well past the current generation, but our export-led recovery is
at the heart of the solution, and our NZ farmers have and will continue to play a big part in that. It should
be our collective hope that farming is seen as being in the national interest again. And, the regulatory
frameworks that support them are enabling, particularly the credit risk appetite to back proven farmers with
strong balance sheets to grow their businesses.