South Island rural property market gains momentum amid strong milk price outlook

Following a challenging period off the back of the Covid-19 pandemic and rising on-farm costs, market activity has grown considerably in recent months.

With green shoots emerging at the back end of last year, that has carried through into 2025. Fonterra’s 2024/25 season forecast Farmgate Milk Price has a midpoint of $10/kgMS, providing a boost for farmers.

Shane O’Brien, director of rural & agribusiness at Colliers Christchurch, says purchasers have been particularly active across the Canterbury region.

“During the past couple of years farmers have worked incredibly hard to make their businesses profitable and many are looking for expansion opportunities or to extend their farming footprint, which is driving a surge in local buying interest,” O’Brien says.

“We have also seen a resurgence among equity partnerships, something that has not been present in the market for several years. Buyers are searching for well-maintained farms with good management practices and strong compliance.”

While interest rates have been dropping as the Reserve Bank cuts the official cash rate, this has had less of an impact in the rural sector compared to the residential property market, according to O’Brien.

In the 2024-25 season, 25 dairy properties have been sold in the Canterbury region, a significant increase on the previous year. This renewed demand for dairy assets has seen the Colliers Canterbury team transact a collection of major deals to start the year, highlighted by the sale of a 179ha Tier 1 farm in Methven for $10.2 million. Another premier offering of a similar size on the outskirts of Ashburton sold for $9.7 million.

Richard O’Sullivan, director of rural & agribusiness at Colliers Christchurch, says as we head into autumn, buyers are seeking purchasing opportunities under the umbrella of an easing regulatory environment, farm cash surpluses, and strong financial backing from major lenders.

“Mid and central Canterbury have been met with the perfect storm of pent-up supply being exceeded by strong buyer demand. This has led to multiple offers being received on most properties we have sold recently,” O’Sullivan says.

“Farmer confidence levels are the highest they have been in a decade and the interest we have received in the recent properties we have taken to market underscores this. Buyers are keen to invest in farmland assets in Canterbury.”

Looking further south, Ruth Hodges, director of Colliers rural & agribusiness in Otago and Southland, says the dairy market in Southland has performed well to start the year with a key theme being a highly localised buyer pool.

“Demand remains strong and a majority of the 24 sales we have seen during the current dairy season are well-located farms that offer appealing infrastructure and production capabilities. One sale topped $50,000 per hectare, pricing not seen since the Global Financial Crisis,” Hodges says.

“Activity in the Gore and Clutha districts has been more subdued. There have been five recent sales across Gore and Clutha.”