LATEST REAL Estate Institute of New Zealand figures show more farms sold in the three months to the end of April than in any period since August 2008.
But commentators say turnover is slowing again as buyers heed falling commodity markets and values remain well short of August 2008, when dairy farm prices peaked just as product prices started to plummet and the global financial crisis hit.
The median sales price then for a dairy farm was a record $4.65m. While REINZ no longer reports whole farm median sales values, taking the average size of the 20 dairy farms sold in April this year (118.4ha) and multiplying it by the average price per hectare achieved ($30,207) gives a value of $3.78m.
REINZ rural market spokesman Brian Peacocke confirmed to Dairy News prices now are well back on those highs.
Recent deals in Waikato, including Fonterra shares, were typically $50,000 to $55,000/ha, with an occasional deal done at $60,000/ha plus, whereas at the market’s peak in 2008 the range was $70,000-80,000/ha.
Values elsewhere are similarly back, though in Canterbury less so, he notes.
“Canterbury values have held quite strong all the way through probably because there’s a shortage of good property [coming to market] and people are prepared to pay for top quality properties where you can control the water input so production is no longer a variable.”
The slump in turnover in April was more than would be expected from seasonality, with signs of a greater slowdown clearly visible as confidence from the good season is replaced by a distinct note of caution, he says.
“Within the rural market, there is acknowledgement that income levels are likely to be down in the forthcoming season. As a result, land purchase decisions are being carefully assessed before commitments are entered into.”
Last week’s cuts to payout forecasts by Fonterra had been well signalled, so the anticipation of that was probably already a factor in the slowdown being seen.
While low interest rates and a weaker New Zealand dollar – making farms cheaper for overseas investors – in theory are positives, neither are likely to outweigh the current commodity outlook in the short term, he adds. “In the broad scheme of things, overseas purchases are not huge at this stage.”
In the three months to April 443 farms of all types sold, compared to 290 in the corresponding period last year, a 52.8% increase. Median price/ha was $18,617, up 3.8% on the three months to April 2011, though back 7.2% on the three months ended March 2012.
Dairy farms averaged $33,132/ha in the three months to the end of April, but the average for April alone was $30,207/ha, with average production of 790kgMS/ha, suggesting there were some low output, low value/ha farms among the 20 sold. In 2011 the average for the 52 farms sold in the three months to end of April was $30,879/ha.
