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Rural property update - Local impact from dairy downturn not yet evident

August 2015

John Sisley column for Te Awamutu Courier, August 2015

In recent weeks, the outlook for dairy has not improved. What impact this has on the local market for rural property is difficult to say as, during the winter, sales drop away anyway. That said, open days held on local farms over the past few weeks have been well attended. Demand for good farms remains and any reduction in values is not yet apparent. If anything, there has been a slight lift in prices compared to last year.

When dairy returns have reached this point in the cycle previously, both buyers and sellers become increasingly cautious and the market decelerates. Such caution is not always wise. Whether times are good or bad, whichever side of the transaction you are on, sound information and a clear direction will ensure you achieve your objectives. Just because the immediate outlook is less positive than it was 18 months ago, those principles still apply.

Among the pessimistic recent reaction, some are speculating about banks forcing farmers to sell. We see no evidence of that happening locally. Alongside their customers, banks have skin in the game and will work hard with any farmer who is financially challenged.

Across PGG Wrightson Real Estate's nationwide network, we see banks working with their farming customers every day. Those supportive relationships will, of course, continue through the current part of the dairy cycle.

Beyond the dairy sector, sales of sheep and beef properties are lower than last year. While returns are excellent, with beef prices sitting at or near record levels, this seems to have put off farmers entering the market, as they seek instead to hold onto their property and capitalise on favourable cash flows. While supply remains tight, demand for sheep and beef properties is inconsistent, with location a significant factor in determining likely interest in any sheep and beef listing. Fortunately, ours is historically a region in which sheep and beef properties are keenly sought after.

Further afield, prospects for viticulture, horticulture and arable are all excellent, and the property market in each sector remains vibrant. Likewise, locally, the lifestyle market and the market for small rural holdings is replicating that buoyancy, with multiple offers on properties now a common occurrence.

Overall, as the traditional spring selling season approaches, calls received from farmers over the past few weeks indicate that a steady stream of well-presented properties will list for sale in the next few months. While interest rates remain low, for those who have sufficient equity, this is an excellent time to buy. Those who act decisively will do well.

Finally, congratulations to two of my colleagues who featured among PGG Wrightson Real Estate's top-performing rural property salespeople last week: Pete Wylie of Te Kuiti and Doug Wakelin of Te Awamutu. Pete ranked eighth top-earning rural salesperson nationwide, while Doug came in at number 15. Well done to you both for a good result and payoff for all your hard work.

John Sisley is PGG Wrightson Real Estate Manager for the Waikato. He began his career in rural real estate in the early 1990s and has an extensive knowledge of farming in the Waikato/King Country area, both dairying and drystock, from Matamata to Raglan.