Dairy farm prices drop 22.5% over the last 12 months but the lifestyle block market is booming

Dairy farm prices have taken a major hit, with the Real Estate Institute of New Zealand Dairy Farm Price Index dropping more than 10% in the last month and over 22% in the last year.

The Index adjusts for the differences that farms’ size and location have on their selling prices, and was down 10.8% in the three months to November compared to the three months to October and down 22.5% compared to the three months to November last year.

The was also a 39% decline in the number of dairy farm sales, with 42 selling in the three months to November compared to 69 sales in the same period last year, the REINZ said.

The Reserve Bank said this week about 80% of dairy farmers are likely to have negative cash flow during the current 2015-16 dairy season, up from 49% in the 2014-15 season. And Statistics NZ said there were a total of 6.4 million dairy cattle at the end of June this year, down 300,000 year-on-year against a backdrop of falling international prices and lower milk solid payouts. Fonterra recently reiterated its $4.60 per kgMS milk price forecast for the current dairy season, although economists note global dairy prices need to improve for this price to be achieved.

The overall rural property property market fared slightly better, with the REINZ All Farm Price Index down 5.9% in the three months to November compared to the same period last year, but up 4.9% compared to the three months to October.

Overall there were 416 farms of all types sold  in the three months to November, compared to 414 compared to the same period last year.

“Variability in weather conditions around the country has been a feature this spring, with many areas experiencing more wind and cooler conditions than normal, yet other regions such as the mid to northern areas of the South Island being impacted by continuing dry conditions and it would seem, the early onset of El Nino,” REINZ rural spokesman Brian Peacocke said.

“The dairy sector reflects such variability with considerably fewer farms sold in November 2015 than in the same period of 2014 and 2013.”

Around the country the market was described as “fickle” in Northland, with more sales activity on grazing blocks but less first farm enquiry and evidence of buyers pulling back on prices.

In the Waikato there was strong sales activity in the eastern districts although buyers had clearly set limits on prices.

In Taranaki the market was difficult for lesser quality farms, in Manawatu/Whanganui there were fewer buyers and a reluctance by established operators to borrow.

In Nelson/Marlborough there was continuing interest in viticulture properties and the mood was confident.

The market was easing in Canterbury, with drought conditions providing a disincentive to sell although there was good demand for “summer-safe” properties.

There was good demand for sheep and beef properties in Otago but buyers were cautious on price and some irrigation schemes were likely to come under pressure due to lack of rain.

In Southland the market remained strong but with stronger demand for sheep and beef properties rather than dairying.

The lifestyle block market remains buoyant with 2200 lifestyle properties selling in the three months to November, up 35% compared to the same period last year.

See below for more detailed analysis of rural sales:

These details are drawn from the Real Estate Institute monthly reports for November 2015, and focus only on farm sales – excluding lifestyle blocks.

The market recorded 173 sales, which is +28% above the same month last year and +23% above the average November over the past four years.

The median price per hectare was $28,671 in November 2015, +4% higher than for October, but -4% below November 2014.

Lower average prices applied across across all farm types except grazing units.

November 2015 sales included:
  15 arable farms,
  27 dairy farms,
  37 finishing units,
  62 grazing properties,
  25 horticultural,
   7 farms of other types

The number of sales is presented here, without the average price, because average prices bounce around dramatically depending on the size and type of business unit being sold. However, the following table sets out the median prices per hectare over the past three months, as reported by REINZ.

$/ha – November 2015 Arable Dairy Finishing Forestry Grazing Hort Special
New Zealand 31,102 35,102 24,409 8,733 16,949 176,783 26,020
Northland   11,947 12,241   9,537 177,165  
Auckland 553,023 30,127 35,244 30,394 23,091 271,167 990,632
Waikato 145,604 50,602 56,310 7,593 31,037 613,383 157,800
Bay of Plenty 337,571 35,003 28,176 20,445 33,333 289,668  
Gisborne 24,905       9,501 97,656  
Hawkes Bay 20,512   12,924   11,405 106,870  
Taranaki 95,870 44,839 49,988 1,266 52,174    
Manawatu/Whanganui 19,706 21,680 30,963 5,153 12,690   4,279
Wellington   25,362 16,280 4,655 8,065 295,498  
Nelson 10,532   28,299 8,733 12,628 120,000  
West Coast   7,885   1,694 6,691    
Canterbury 30,464 55,283 34,174 20,009 19,195 44,360  
Otago 8,790   9,624 8,750 13,118 211,595 4,852
Southland 4,841 36,105 22,427 4,858 22,932    

You can find current farms for sale and listed on the market here.