We have been running Footprint into Land workshops for the last 6+ years, bringing first-time farm buyers together and successfully matching them to potential farms, often directly with the vendors themselves. In our view, the time has never been better to have a crack at farm ownership than this autumn.
Matching the supply of rural listings with market demand is something we pay close attention to, in plain speak, how farms are selling in any given year against the median sale price per hectare. More latterly, we’ve been tracking how many farms sold last month compared to the same time last year, and how that compares with the 10-year median for that month. In a nutshell, we want to know how good is good.
1. The market is the market, and the number of farms sold, in any given month, has been at or above the 10-year median for the last year. The supply of farms coming to the market is very much in line with long-run expectations, with a good range of listing opportunities, priced to sell.
2. Bank appetite to support first farm purchase scenarios is on a much firmer footing this season; compared to a couple of seasons back, where vendors often had to be the bank, and utilise multiple titles to secure their vendor funding advances with lease-to-buy arrangements on the balance.
3. Buying a dairy farm now, particularly outside the dress-circle locations, has never looked more affordable in a very long time, particularly if you are prepared to be flexible and look outside your immediate area.
If we want to delve further into the dairy opportunity, successful sharemilkers can buy dairy property at a local median price in many regions that has hardly shifted in five years, and at the same time sell surplus dairy cattle for record prices and bank the gains. While there is no denying the return from dairy cattle, there is also no denying the volatility in their valuations. By comparison, the NZ dairy land is a much stronger strategic play, particularly over the next five years, given how well capitalised the dairy industry is today compared with any time previously. Affordable interest rates in the near term and current farm gate returns should provide further impetus to pull the trigger and buy the farm.
Sheep and beef properties are equally good shopping, given that the alternative land-use premium is no longer pushing values beyond what is affordable. The biggest near-term constraint is the cost of livestock in support of expansion, further compounded by a very strong summer grass market. Typically, sheep and beef farm operations have avoided over-leveraged debt-to-equity positions; if they hadn’t, many would not be here! Hence, strong balance sheets, affordable interest rates, and some of the best farm gate returns for animal protein ever suggest this segment of the rural property market is only likely to get stronger.
For those leasing and looking to secure their first grazing farm, this autumn looks like a very good option to utilise livestock revaluation gains and protect against future volatility in stock prices.
For the established farmers, value buying is the norm now, however nobody appears to be factoring hill country getting any cheaper from here. The reset has definitely occurred. Vendors will have a valuation hurdle to meet before an exchange of contracts, but, importantly, that hurdle is now tied to farm production, particularly in the more extensive hill country.
To conclude, this year is a very good year to be a farmer. Not all of the market has quite got there on that yet, hence now could be the opportunity to secure a farm. If getting a foot on the rural property ladder is your goal, now is a very good time to lace up the boots.
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.
