Dairy paving the way for rural property market recovery
May 2024

Dairy paving the way for rural property market recovery

Dairy looks set to lead the recovery of the rural property market.

Having been at a low point of the cycle for several months, the market now seems poised to rebound, with dairy farm sales likely to light the way.

PGG Wrightson Real Estate General Manager Peter Newbold detects a growing positive sentiment among dairy farmers.

“With dairy payout projections between $8.30 and $8.90, confidence is returning to the sector, encouraging buyers to step up, at least in some regions.

“Where we have seen transactions, dairy farms have sold well. While it is still a buyers’ market, values remain close to the benchmarks achieved two years ago.

"That said, purchasers are selective. Only farms that meet criteria around location, productivity and presentation are attracting interest, and any offers tabled are subject to conditions around environmental compliance and longevity of resource consents. Typically sales are taking a fair amount of time and effort to complete, definitely longer than they were a couple of years ago” he says.

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Real estate activity in the sheep and beef sector is yet to show signs of revival.

“Our salespeople are busy with enquiries, though transactions of sheep and beef properties are still at a low ebb. Interest rates, high production costs, labour challenges and inconsistent returns have created general uncertainty, leading to a lack of confidence, dissuading both buyers and sellers.

“Sales of marginal sheep and beef farms for land use change to forestry have slowed after previous peaks, though some await decisions by the Overseas Investment Office, which may re-initiate this part of the market. If obtained, central government clarification around the Emissions Trading Scheme and overseas investment criteria would reignite interest in relevant properties.

“A group of purchasers appear to be waiting for values to drop. A mismatch in pricing expectations, where offers from purchasers are lower than vendors will willingly accept, is a factor in low sales volumes for sheep and beef property,” says Peter Newbold.

Dairy sector activity is likely to increase slightly through the coming months.

“A sustained lift in the payout will encourage vendors who may have postponed exiting the sector, likely boosting dairy listings compared to last season. A pool of buyers remains motivated and active, though will be selective. Vendors would be well advised to prepare their documentation, and present their farms accordingly, and they must be prepared to meet the market. There will be a backlog of farmers ready to move on with their lives and therefore likely to list property for sale in the spring, which should see a lift in the level of activity.

“Uncertainty is also evident in horticulture and viticulture, though prospects are for sentiment to improve in the spring, when we expect some good listings in both sectors,” he says.

Meanwhile, residential and lifestyle property markets are also poised for an upswing.

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“Historically a sluggish market like this will generally ease when buyers and sellers reach agreement on how far values have shifted. Momentum re-establishes when enough vendors realise that what they will receive for their property is no longer at the peak levels that prevailed previously, with the redeeming factor being that they are buying and selling in the same market.

“We are also seeing greater enthusiasm from banks, while economic conditions in Auckland are starting to pick up, which usually indicates a more positive market through to the rest of the country is not far away. Changes to government policy around the bright-line property rule and tax are also stimulating renewed activity among investors,” says Peter Newbold.

Find out what is happening in the property market in June.


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