The dairy property market in 60 seconds
Biggest trends Strong long run milk price add confidence Consistency in payout and strong outlook for 2021/2022 has continued to boost confidence amongst dairy buyer groups. Strong cash yields have enabled capital investment, providing assistance to reduce the burden of environmental compliance. Environmental standards add due diligence Environment standards around run-off have potential to impact farm production and/or capex required. Buyers and lenders are seeking higher levels of information so they can assess the impact on individual properties. Activity across whole dairy market Smaller land holdings continue to attract premiums from neighbours competing for adjoining farms. Trend is most active in Waikato and Bay of Plenty due to historically smaller farms. Activity has returned to the South Island dairy market for those seeking scaled stand-alone investments. Outlook for the next 12 months Growth in cross sector buyers In addition to existing dairy operators looking to expand, interest has increased from sheep and beef farmers looking to diversify cash flow. Commercial property investors or those new to farming are equally attracted to yields and the reasonably systemised nature of dairy investment. Cream rises to the top As buyers become increasingly cautious about environmental standards, saleability increases for farms with A grade environmental audits and/or are on track to meet long-term targets. Emphasis on the Future Maintainable Production Equation (FMPE) continues. Margin squeeze potential Inflation of farm operating costs and recent increases in borrowing costs may squeeze margin on farm. There is also now uncertainty surrounding future interest rates after CPI inflation spiked outside the RBNZ target band. Debt appears to remain accessible for well-capitalised dairy assets with ability to amortise debt.
Director’s Piece
Despite some negative commentary and extended days on market, dairy sales have continued across Auckland and Northland. Reduced numbers of buyers are engaging but with greater clarity as to the style and class of dairy farm that they are seeking. Without question the specifics around location, soil type, infrastructure, contour and production capability remain at the forefront of buyers minds, who currently have more dairy farms available to consider since the early 2000’s. As always, it is the purchasers expectation of price or perception of value that ultimately determines a sale.
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Tony Grindle 021 432 308
[email protected]
Director, Bayleys Northland Country
MACKYS REAL ESTATE LTD, BAYLEYS, LICENSED UNDER THE REA ACT 2008
