Hill Country property outlook for 2025 and beyond

Tuesday, 21 January 2025


Profit Drivers Key for Hill Country and Finishing Farmers in the New Year


As we embrace the New Year and look for opportunities for those making a living from Hill Country and Finishing Farming, the profit drivers supporting the farm balance sheet are more important now than ever. While this might seem an obvious statement to make, what is less obvious is that historically, valuation drivers in the 200ha+ pastoral market have been most strongly influenced by alternative land use options, not current business earnings, going right back to pre-GFC.

For those considering selling their breeding/finishing farm, it is worth getting a handle on what has historically driven the market, where the market is now, and, importantly, the most likely market influences for 2025 and beyond.

The table below is a very useful summary of where the market for 200ha+ hill country and finishing farms has been going back 18 years.


This market peaked immediately pre-GFC with 400 farm sales for $1.749 billion, the OCR on 1st January 2008 was 8.25%, and floating interest rates 10% plus. Finished lamb was struggling to make $100/head, and wool was still in the doldrums back then too. The dairy conversion boom underpinned many of these sales and remained a strong influence until 2014. On-farm profitability from the existing land use was much less of an influence, and LUC 1-4 land for dairy drove the market.

Post-2014, in the run-up to 2020, the market operated more within the existing land use (farmer to farmer) at approx. 200 farms for $800m sold annually, with a median price of $7,000-$8,000/ha. The market was underpinned by very strong beef and lamb schedules and record-low interest rates. In 2020, however, the market took a check as the primary sector’s access to banking capital hit up against regulatory hurdles; despite money never being cheaper, the OCR 1st January 2020 was 1%!

But like all things farming, things can change very quickly, and over 2021 and 2022, the market absorbed the impact of the billion trees policy and the knock-on “golden ticket” that enabled extensive hill country to be sold for trees at prices more aligned to finishing values. Given the magnitude of this opportunity, it is interesting to note that annual farm sales in 2021 (195 farms) and 2022 (183 farms) were only ever on par with an average year.

When pasture to forestry was at its peak, the value of total sales (200ha+) hit $1 billion in 2022, which was only 20% up on the long-run annual market value. However, it was the highly concentrated nature of these sales, notably on the East Coast of the North Island, in conjunction with the policy settings themselves, that gave rise to some very rapid land use change with entire stations converted to trees, severely impacting those rural communities.

So where are we now? On balance, the issues with overcapacity, wool prices, and a declining sheep flock have been long-term systemic issues well before 2021 and 2022. Since then, over the last two calendar years, the 200ha+ breeding and finishing property market has been operating at 50% of its prior 10-year averages by farm sales, total farm sales value, and, importantly, hectares sold (45,000/ha last year). Median prices have held up, but that is the only thing that has. We can say for certain now that ‘pasture to trees’ is no longer driving farm valuations. At best, forestry might be underpinning farm valuations at historic long-term farm averages ($7,000 to $8,000/ha), much like it always has done.



So where to from here? On the current trend, farm sales must double to return to a long-run average of 200 farms sold for $800m to $1 billion in sales value from 100,000ha sold. The market needs a circuit breaker because interest rates alone, as we’ve seen in the past, are not always enough. The good news is there may just be one. This circuit breaker has the power to give one neighbour a significant competitive advantage over another, and that’s cash flow. A strong cash flow will improve saleability for those wanting full value for their farm and the horsepower to attract the next generation to invest.



Hon Todd McLays’s announcement on the 6th December 2024 to limit farm to forestry conversions entering the ETS and protect ETS certainty for foresters has potentially gifted farmers a significant opportunity to participate in this land use change without having to sell the farm, and dramatically improve cashflow and farm profitability. The ability to attract sustainability funding to develop the farm, hedge the commodity cycle, and provide a range of exit strategies (cutting & carbon rights) are very real options now. In addition, these decisions could provide legitimate capital release options for those up against it in the future without selling the land.

Irrespective of your view on a decarbonising economy, it’s hard to see how wood will not have a stronger mandate looking ahead 20+ years. However, over the next 5-10 years, there will be a carbon circuit breaker to help scale or exit the farm business. Most will see this as a bridge too far. Still, our business has always had our vendor’s best interest at the centre of any marketing program. In the forward view, if 20% of the farm is generating 50% of the profit with little labour input, we are firmly of the view we can fi nd buyers for that farm.

Change and opportunity are easy things to write about, much harder to adopt and implement; the numbers are the numbers currently, and without circuit breakers, they are likely to stay on trend for a very long time. Scale has been the primary mechanism for maintaining business viability in our sheep and beef sector by doing more with less labour over the last 20-30 years. This is not a very attractive proposition in the long term, particularly from the next generation’s perspective. Our advice never changes: get advice on options that best suit your family and business situation.

Recent Central Government announcements are food for thought, quite literally.

Whether you’re looking to buy or sell your farm or lifestyle property, our True Team is here to exceed your expectations. With a perfect blend of energy and experience on your side, you can’t go wrong with Property Brokers.









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