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Rural market update and dairy spotlight


Property Brokers 22 Jul 2020

ConradWilkshireThe NZ Rural property market continues to reflect the varying levels of banking confidence in the NZ primary sector, generally.

For the 12 months to June 2020, NZ rural sales 20 hectares and over equalled 869 sales for $2.164 billion, 73% of those sales can be attributed to sheep and beef livestock farming.

Annual NZ horticultural sales equalled 161 for $418m by value to June 2020 with robust forward-demand and investor appetite for opportunities.

The spotlight, however, remains on the low level of dairy farm sales up and down the country, though, there have been some silver linings in key dairying regions, notably the Waikato.



NZ Dairy farm sales 20 hectares and over, equalled 139 sales for $548.5m for the 12 months to June 2020. The prior year was 221 sales for $895m. This data includes recorded private sales.

What is particularly interesting with the NZ dairy market is the lack of activity at the top end. Only six of the 139 dairy sales, sold for $10 million-plus, the highest being $15 million. The prior year was similar, with only ten dairy properties sold in the $10m+ range nationally.

70% of all dairy sales are less than $5 million by value. Clearly finding banking support for the purchase of largerscale dairy operations nationally, and particularly in Canterbury, continues to be challenging, as the below-table for the last 12 months illustrates.

So, while primary industry rural property valuations continue to surge, generally speaking, the concentration risk associated with our dairy industry, and the associated level of indebtedness, continues to place operating constraints on the expansion aims of proven dairy businesses.

Our NZ dairy industry appears to be stuck; in reality, the value opportunities to buy large scale dairy operations at a fair market price have never been better.

So perhaps the narrative has to change from the level of indebtedness associated with the sector, to the excellent comparative investment returns. NZ’s reliance on our export dairy produce in a post Covid-19 recovery surely rules a line under the need to support this sector as we meet the challenges of sustainable production head-on.

It is our view that the focus has to shift to the underlying returns, and the investment opportunity for new capital available, either on-shore; or from high net worth investors returning home in conjunction with off-shore cornerstone investment.

A change in government policy to loosen current Overseas Investment Office criteria, looks unlikely at this time. The gap then is the quality of the information in support of an investment-led NZ real estate approach. Property Brokers, in partnership with Farmlands, will be looking to take all the steps available with industry, to bridge this gap on behalf of you our Farmlands shareholders.