A rising milk price forecast to $10 a kilogram of milksolids appears to be breathing new life in the rural real estate marketplace for the province.
In the latest Real Estate Institute of New Zealand (Reinz) data, 31 farms were sold in Canterbury in the three months to December, one fewer than the same period a year ago.
Canterbury’s median price for the dairy farms sold was $55,000 a hectare, with the average size at about 266ha, which was up on $45,165 nationally for an average dairy farm of 141ha.
Reinz director and rural spokesman Shane O’Brien said the higher median price for Canterbury made sense as it was probably the most productive dairying area with large herd sizes and irrigation.
He said several strong sales in central and Mid Canterbury had multiple bids.
"The Canterbury market had a strong finish to the year with the first part of the year relatively subdued in that farm sales were slow to occur and buyers were being cautious as interest rates were still comparatively high from what they were a couple of years ago. With the exception of dairy most other farming sectors were still battling relatively low product prices and increasing on-farm costs."
He said more dairy farms going through the process of being sold in December would appear in results once the due diligence and consenting was completed.
The median for dairy support land was $39,000/ha and the overall median price of all farms sold in the quarter was just under $45,000/ha, showing the influence of dairy and dairy support sales.
The dairy industry had been good at cutting unnecessary costs out of their business for a lean cost of production, he said.
"So therefore when this new payout came through a lot of them were in a position to take advantage of some cash surpluses. If you look at the dairy sales around Canterbury, just about all of them were bought by local buyers and not corporates or overseas parties. They were family-owned business looking to expand."
Some of the sales were by people looking to move on from equity partnerships and some had sold one farm to buy another, often larger, farm.
New equity partnerships entering the market were an encouraging sign for the industry, he said.
He said some sheep and beef properties had remained unsold and potential sellers mindful of that could be delaying listing their farms.
Finishing and grazing properties sales remained subdued.
"Beef prices were relatively good, but sheep prices were still back on what there had been for some time so there’s not been great surpluses coming out of the sheep and beef sector and not really the confidence to drive the buyers in that market."
Big stations or "named" properties had yet to appear on the market lately.
Mr O’Brien said the rural real estate market was showing signs of strengthening nationally, including strong avocado and kiwifruit orchard sales.
Buyers were expected to be cautious about the conversion of land to forestry as a result of rules on overseas investment, he said.
"The traditional sheep and beef market across New Zealand will remain fairly slow-moving until we get an increase in product prices and a further drop in interest rates. Interest rates are going to continue to fall so I think that’s not an if, it’s a when and will occur, and we know the sheep and beef market is very cyclical. The other thing is significant sheep and beef areas the past couple of years, particularly North Canterbury and Hawke’s Bay, have had some tough droughts or been very dry and that impacts on profitability."
He said a lot of activity was unlikely to return until confidence was restored and it would be "steady as she goes".
Nationally, 315 farms were sold in the three months ending December, up about 70 properties sold in the same period a year ago.
The median price per hectare for all farms during the quarter was $28,710, down 13.6% from $33,220.
The $45,165 median sales price per hectare for 78 dairy farms was up from $41,020 (41 properties).
For 58 finishing farms — averaging 44ha — it was $32,615, down from $35,060 (73 properties).
The median price for 39 grazing farms — averaging 107ha — was $11,710/ha , back from $13,510/ha (51 properties).
Reinz said an increase in dairy and dairy support farm sales signalled strong confidence, while the decline in grazing and finishing farms suggested changing land use priorities.
Last year there was a nearly 32% increase in arable farms sold across the year.
Mr O’Brien said there had been some good arable sales mainly at the beginning of the year for Mid Canterbury farms with good, low cost irrigation on strong soils.
