This is back a third by number and back a billion dollars by value, on the same time last year. All of which transpired well before any of the current revisions to the commodities outlook or farmer confidence surveys.
The farming landscape
The formidable challenges of the last 12 months have been well documented, with extreme weather events, rising interest rates, new regulatory measures coming into force, and double-digit on-farm inflation. However, as the spring season unfolds, we’re seeing a noticeable increase in buyer inquiry for pastoral and dairy land compared to last year. Buyers are prepared to operate at levels that reflect the true cost of finance.
Beyond the Commodity Cycle
In addition, the general uncertainty in the commodity cycle inevitably gets factored into the market expectations. However, when looking back over the last decade, farm gate returns have not been the driver for farm sales, as many of us may think. In 2019 and 2020, when the payout was improving, and money had never been cheaper, dairy farm sales were at their lowest in a decade. While money was cheap, it was difficult to access, given bank regulatory concerns over the level of rural debt exposure at that time.
The lowest payout year of the last decade was 2016; dairy farm sales (193) in that year transacted at levels ahead of last season (173), which is surprising given the 2023 season’s near-record Fonterra payout. Rising interest rates and on-farm inflation were the most significant influences on last season’s dairy sales, not payout.
Two influential trends in the market
Two themes have influenced the market in recent years; improved access to rural credit for better dairy businesses as overall debt dropped, and central government policy settings with foreign investment and alternative land use options tied to the ETS.
The latter drove unprecedented demand for pastoral Hill Country. However, depending on your point of view, there are now two corresponding inconvenient facts; the first is rural debt, which is not unsurprisingly on the rise again. The second, is recent changes to the Overseas Investment Office in favour of ‘The Benefit to NZ test’ dramatically shifting the view of what pastoral land is now deemed suitable for long term production forestry, with only one decision approved currently under this test at the time of writing. Under the previous Special Forestry test, 87 farms were consented in favour of forestry, with no declined decisions dating back to 2018.
Navigating the market
Our team at Property Brokers have the knowledge and experience to deal in the market we find ourselves in today. We are not buying into deferring marketing decisions in favour of next season. On current forecasts, there is nothing temporary with today’s interest rate settings and no apparent central government policy position likely to ramp up land values either. In the market’s favour, our primary exports still account for 80% of the country’s trade, with investment in compliance and on-farm best practices at levels never seen before. The market has reset, and opportunities now exist on both sides of the sale and purchase agreement.
Market realities and opportunities
For those moving up the property ladder, buying and selling on the same market has never been more true than today. For those selling their property and looking to retire, the bank returns are often well in excess of what they can make from the farm. At times, we need to be more creative to get deals together, and we continue to look at all the options, including long-dated lease-to-buy contracts and, where appropriate, vendor finance terms, to help vendors and purchasers achieve their long-term goals.
A competitive spring market
From the bottom of the south to the top of the north, we have a brilliant lineup of rural properties coming to the market, and we thank our vendors for their support. Coupled with positive numbers of cashed-up buyers attending farm open days, it is creating a competitive market and a positive outlook for the spring.
Whether you are looking to buy or sell your farm, we have the team to exceed your expectations, and with a great mix of energy and experience on your side, you can’t go past Property Brokers.
