Thelatest Bayleys’ Rural Market Update for the dairy sector indicates that althoughstrong long-run milk prices are giving buyers some confidence, inflationary pressuresand continued environmental compliance requirements are providing layers ofcomplexity to transactions.
Inissuing the report compiled by its Insights & Data team, Bayleys’ nationaldirector rural, Nick Hawken said while the dairying property sector is becomingmore complex, the changing market conditions provide increased opportunity forbuyers.
“Buyersof dairy property are being far more considered about what they are actually lookingto acquire, but the range of opportunities available to buyers has widened,” heexplained.
“Whileit’s always been an important factor, the quality of the assets is paramount intoday’s market with buyers looking to capitalise on existing infrastructure andleverage past production performance to provide a pathway to growth.
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“Expectationsaround environmental standards are continuing to add to the due diligenceprocess for buyers and lenders, with good information being demanded.
“However,quality properties continue to attract interest, are still selling well, andthe banking sector remains happy to lend on proven assets that have beenwell-managed.”
Lookingat some of the core dairying regions, Hawken said there’s still solid interestbeing shown in the South Island – particularly for Canterbury properties withreasonable scale – and the Waikato market remains fairly stable, albeit withsomewhat different dynamics.
“Withthe Waikato generally having smaller holdings, we continue to see neighbouringfarmers competing and acquiring those smaller-sized assets to strengthen or future-prooftheir production with a larger platform,” he said.
“Nationwide,dairy property inventory has increased through spring which is giving buyersmore options and the well-capitalised operators continue to be attracted to qualityassets in premium locations.”
Hawkensaid dairy farmers are accustomed to farm gate price fluctuations and the needto adjust cost structures accordingly.
“Today,while the top line number is very attractive at around $9 per kilogram of milk solidsfor the 2022/23 season, it’s obvious that profit margins are being squeezed byrising on-farm costs and owners are having to adapt to interest rate rises.
“Whilerising interest rates are starting to add headwinds to buyer affordability, accessto debt is expected to remain available for well-capitalised operations.”
“Andalthough farm-gate pay-out projections remain strong, the Global Dairy Trade (GDT)has been trending downwards.
“Withthe Chinese economy tipped to grow again once rigorous pandemic restrictionsare eased, it will be interesting to see if a corresponding uptick in China’sdemand for our dairy products follows, although there will inevitably be somelag.”
Hawkenalso references the uncertainty in the broader New Zealand rural market aroundthe way agricultural emissions are priced.
“TheHe Waka Eke Noa consultation process to establish a pricing regime for on-farmemissions has not resulted in a cohesive action plan, with policymakers and farmersstill not aligned.
“Thisinevitably creates some unease in the market, however, farming life goes on andproperty continues to change hands.”
Real Estate Institute ofNew Zealand (REINZ) data for the 12 months to September 2002 shows mid-range pricing per hectare for dairy properties was in the $31k - $52k band.
Mid-rangeland area for dairy properties sold was 79ha – 187ha, and the total land areaof dairy properties sold (excluding dairy support properties) was 36,586ha.
Bayleys’rural sales’ team has broad experience through changing real estate markets andas buyers now have increased opportunity, Hawken said it’s important thatvendors utilise a range of marketing techniques and opt to sell their ruralproperty with an agency that has depth and breadth of network across thecountry.
“Wehave teams on the ground from the far north to the deep south, and ourwell-connected network – including professionals in sales, valuation, capitalmarkets, and advisory – can add tangible value at every stage of thetransaction process from start to finish.”
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