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Strengthening Spring Rural Market

Strengthening Spring Rural Market

Summary

Data released today by the Real Estate Institute of NZ (“REINZ”) shows there were 12 more farm sales (+3.5%) for the three months ended October 2015 than for the three months ended October 2014. Overall, there were 358 farm sales in the three months ended October 2015, compared to 337 farm sales for the three months ended September 2015 (+6.2%), and 346 farm sales for the three months ended October 2014. 1,731 farms were sold in the year to October 2015, 9.9% fewer than were sold in the year to October 2014.

The median price per hectare for all farms sold in the three months to October 2015 was $27,579 compared to $27,547 recorded for three months ended October 2014 (+0.1%). The median price per hectare rose 6.0% compared to September.

The REINZ All Farm Price Index rose 0.6% in the three months to October compared to the three months to September. Compared to October 2014 the REINZ All Farm Price Index fell by 5.9%. The REINZ All Farm Price Index adjusts for differences in farm size, location and farming type, unlike the median price per hectare, which does not adjust for these factors.

Seven regions recorded increases in sales volume for the three months ended October 2015 compared to the three months ended October 2014. Auckland recorded the largest increase in sales (+23 sales), followed by Hawkes Bay (+13 sales) and Otago (+9 sales). Compared to the three months ended September 2015, eight regions recorded an increase in sales.

“Whilst the total sales figures for the three month period ending October 2015 confirm a slight increase in volume, they fit within a pattern as the figures for the equivalent period over recent years, being 2013 (349 sales); 2014 (346 sales) and 2015 (358 sales) are remarkably consistent”, says REINZ Rural Spokesman Brian Peacocke, “Of note however, are the feature points in the rural marketplace during the month of October, particularly the volatility in prices at the Global Dairy Trade auctions, the projected benefits from the Trans Pacific Partnership Agreement, the increasing number of farms being marketed for sale, especially in the greater Waikato region, and speculation surrounding the values of such properties.”

“That speculation gained some answers in the latter part of the month with good farms being offered by genuine vendors prepared to meet the market selling at values fully firm on last season.”

Highlights include:

• Insufficient supply to meet the demand in Northland where an easing in prices is anticipated;

• Strong demand in the Waikato with some exceptional prices being achieved for quality grazing / finishing / dairy support type properties and two very strong sales of quality dairy units in the Waipa district at $65,800 and $57,500 per hectare respectively, exclusive of shares;

• Extraordinary strength in the Bay of Plenty kiwifruit market with very strong demand throughout the region and a report of a top quality orchard in the Te Puke district selling at $400,000 per canopy hectare for the green kiwifruit portion and $570,000 per canopy hectare for the producing gold kiwifruit area;

• A slow market in Taranaki where a wet, cold early spring has impacted to a degree, albeit reports of good activity building for November;

• Steady market conditions in the lower North Island with good demand for sheep and beef properties in Hawkes Bay, where recent rain has eased early El Nino concerns, and further to the south where a solid dairy sale has been recorded in the Eketahuna district. Throughout the region there is evidence of a differentiation in price between vendors and purchasers;

• Good interest in limited stocks of sheep & beef properties in Marlborough where activity also continues strongly on good viticultural properties, this strength being supplemented by the recent TPP Agreement, with a beneficial flow on through the region for employment opportunities. Strong concern regarding El Nino with dry spring conditions prevailing to date and aquifer levels reduced accordingly;

• Mixed interest in dairy units in Canterbury with inconsistent activity, albeit solid activity in the dry stock / arable sectors. Quality properties are expected to continue to sell well;

• A reasonable level of listings on the West Coast with the market gaining momentum and good enquiry for dairy properties from first farm purchasers progressing from the share milking base. Indicative sales around $26,000 / $28,000 per hectare inclusive of Westland Dairy shares;

• A later spring in Otago with steady activity in sheep & beef finishing and grazing units; and

• A slower market in Southland with early sales activity indicating a drop in value of around 7%. Good interest in good properties but no demand for medium or lesser quality farms.

Grazing properties accounted for the largest number of sales with 42.7% share of all sales over the three months to October 2015, Finishing properties accounted for 18.7%, Horticulture properties accounted for 19.0% and Arable properties accounted for 9.8% of all sales. These four property types accounted for 90.2% of all sales during the three months ended October 2015.

Dairy Farms

For the three months ended October 2015 the median sales price per hectare for dairy farms was $31,552 (18 properties), compared to $25,108 for the three months ended September 2015 (11 properties), and $43,299 (23 properties) for the three months ended October 2014. The median dairy farm size for the three months ended October 2015 was 130 hectares.

Included in sales for the month of September were 10 dairy farms at a median sale value of $35,303 per hectare. The median farm size was 130 hectares with a range of 70 hectares in Waikato to 549 hectares in Southland. The median production per hectare across all dairy farms sold in October 2015 was 958 kgs of milk solids.

The REINZ Dairy Farm Price Index rose 6.0% in the three months to October compared to the three months to September. Compared to October 2014, the REINZ Dairy Farm Price Index fell by 18.6%. The REINZ Dairy Farm Price Index adjusts for differences in farm size and location compared to the median price per hectare, which does not adjust for these factors.

Finishing Farms

For the three months ended October 2015 the median sale price per hectare for Finishing farms was $25,333 (67 properties), compared to $25,414 for the three months ended September 2015 (65 properties), and $31,878 (45 properties) for the three months ended October 2014. The median finishing farm size for the three months ended October 2015 was 33 hectares.

Grazing Farms

For the three months ended October 2015 the median sales price per hectare for Grazing farms was $19,253 (153 properties) compared to $15,966 for the three months ended September 2015 (152 properties), and $14,290 (166 properties) for the three months ended October 2014. The median grazing farm size for the three months ended October 2015 was 48 hectares.

Horticulture Farms

For the three months ended October 2015 the median sales price per hectare for Horticulture farms was $171,482 (68 properties) compared to $166,552 (58 properties) for the three months ended September 2015, and $179,894 (59 properties) for the three months ended October 2014. The median horticulture farm size for the three months ended October 2015 was eight hectares.

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