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Dairy farm prices stalling, lifestyle blocks strong: REINZ

Dairy farm prices stalling, lifestyle blocks strong, REINZ data shows

By Fiona Rotherham

July 16 (BusinessDesk) - Farm sales are down 9 per cent in the year to June and dairy farm prices have begun a slight downward trend, according to the latest Real Estate Institute of New Zealand data.

There were 62, or 11.5 percent, fewer farm sales for the three months ended June, compared to the same period a year ago and the overall year to date is down 9 percent to a total of 1,737 farms sold.

The median price per hectare for all farms sold in the three months to June was $29,141, compared to $26,634 in the same period the previous year, up 9.5 percent. But the All Farm Price Index, which adjusts for differences in farm size, location and farming type, rose by just under 1 percent in June compared to the same month in 2014.

The biggest price downturn has come in dairy farms, following the sombre outlook for dairy product prices, which sank in the latest GlobalDairyTrade auction overnight to the lowest level since July 2009. Described by AgriHQ as "disastrous", the result is expected to see farm debt rise.

The REINZ Dairy Farm Index fell by 5.5 percent in the three months to June compared to the three months to May. It has dropped only 0.3 percent in the year to date compared to a year ago.

REINZ rural spokesman Brian Peacocke said the latest drop could be related to the time of year, as typically properties that aren’t in the top category get sold as the season tails off, which affects prices.

But he said it was inevitable the grim outlook for dairy product prices would have an eventual impact on dairy farm values, although he doesn’t expect that to be dramatic.

“Good properties will tend to be held. If the owners are not going to get the value they perceive, they simply won’t sell. I expect we’ll see some impact on second tier properties as we did in the 2007/08 downturn,” he said.

Price drops in the last downturn were up to 30 percent for fringe dairy properties and half that for good ones, he said, but he’s not forecasting that level of drop this time around because differences include the low interest rate environment and the falling exchange rate.

“If the dairy payout stays where it is it will inevitably put pressure on prices. I don’t think we’ll see a change in the short-term and any pressure in the marketplace will be handled carefully by farmers and their professional advisers, who include the banks,” he said.

For the three months ending June, the median sale price per hectare for dairy farms was $35,531 with 64 properties sold, compared to $35,381 for the three months ending May.

Overall, Peacocke said the rural market was maintaining reasonable momentum.

Three regions recorded increased sales volumes in the June quarter compared to the previous year, with Auckland the highest, showing a 19 percent sales lift, followed by Bay of Plenty and Wellington.

There was a slower market in North Canterbury due to the impact from the autumn drought and severe winter conditions.

There was solid sales activity for grazing properties in Northland, Auckland and Waikato with the median sales price per hectare for grazing farms at $17,294, with just over 200 properties sold in the quarter compared to $16,638 for the three months ending May and $14,819 for the three months ending June 2014.

The biggest uplift came in the lifestyle property market with sales up 32 percent in the three months to June compared to the same period a year ago. There were 2,079 lifestyle property sales in the three months. In the June year to date, sales are up 8 percent.

Demand pushed prices up for lifestyle blocks, with the national median price rising 6.8 percent, or $35,000, from $515,000 for the three months to June 2014 to $550,000 in the same period this year.

‘”The lifestyle property market continues to go from strength to strength in the most heavily populated regions, with record volumes of sales, higher demand placing pressure on prices and the resulting clearance of long-held stock at very strong values,” Peacocke said.

(BusinessDesk)

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