Friday, March 29, 2024

Farm market seeks spring clues

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The farm real estate market will soon be getting a feel for the activity and price levels in the important spring sales period.
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A good number of properties will be coming to market and the main questions are what level it will emerge at and what the influence of the banks will be, Real Estate Institute rural spokesman Brian Peacocke.

A few significant early-listed farms are expected to have the sale process completed by late October and other properties are listed and waiting for marketing to begin.

“We will be looking at attendances at open days and feedback from the people attending them to get a guide.”

There is a view banks are looking for reasons not to lend rather than reasons to lend. 

Peacocke said the market hopes falls in the Reserve Bank’s Official Cash Rate will offset bank caution about the expected increases in their required capital reserve levels so farm affordability might be seen to be improving, especially with the high product prices being received by some sectors, notably sheep and beef.

A number of farms taken off the market last spring and summer after failing to sell might come back this season, possibly with vendors prepared to recognise the softer prices than they hoped for previously.

“Good properties will continue to sell well and for others price will be the trigger point and that can be up to vendor expectations,” he said. 

The institute’s latest farm sales report shows median prices for finishing and grazing farms have strengthened well over the last year though the number of sales remains down on previous peaks, at 1349 for the year to August, nearly 8% down on the previous year.

The median price for finishing farms rose 13% over the year to the end of August on sales down 8.6%. Grazing farm transactions were down just 1.1% and the median price rose 11% year-on-year.

Northland, Waikato, Gisborne, Taranaki, Manawatu-Wanganui and Nelson-Marlborough had reasonable trading in the sector with Bay of Plenty-Rotorua having good finishing sales at strong prices and Canterbury having good and steady activity in grazing properties at pleasing prices, the report said.

Turnover of dairy farms remains at low levels, down just over 38% in the year to the end of August. The median price has fallen 4.4% over the year but the institute’s dairy farm price index rose 8%. Prices weakened from the latest July period to the August results, measured by a 2.8% fall in the price index.

August  is generally one of the quietest trading periods of the year, Peacocke said. 

Southland and Otago had the most marked downturns in sale numbers in the three-month period compared to the same time last year, with 22 and 10 fewer sales respectively. Southland had minimal stirring within the sleeping giant at this stage with the build-up to spring just getting under way.

The reduction in Southland was likely to reflect the large number of dairy farms on the market and the self-contained nature of the market now, Peacocke said. 

The flow of buyers from outside the province appears to have dried-up.

The median price across all farms sold nationally during the three-months was $25,346/ha, up from $19,792/ha a year earlier, a gain of 28.1%, highlighting the ratio of grazing and finishing sales, at 64% of the total. The gain from July to August was 8.2%.

The institutes all farm price index slipped 0.3% between the July and August periods but year-on-year the gain was 4.4%.

The all farm and dairy farm price indices adjust for differences in farm size, location and farming type, which the median measure does not do.

For finishing farms the August three-month median price was $31,660/ha, down from $32,423/ha  for the latest July period but up from $28,011/ha for August last year.

For grazing farms,the August median price was $11,337/ha, up from $11,138/ha in July and $10,168 for August last year.

The dairying median price for August was $29,470/ha, down from $32,701/ha in July and $30,830/ha in August last year.

The horticulture block median price was $212,509/ha for the latest period, up from the $210,458/ha in July but well off the $255,351/ha August 2018 median price, a near 17% decline.

Median prices for arable farms are not recorded but sale numbers were 13.7% lower year-on-year.

Peacocke said issues affecting the farming sector include the nationwide emphasis on freshwater and swimmable rivers though there are strong claims the residential sectors are as much to blame for pollution as the rural sector.

A harder lending stance by banks and indications the Ministry for Primary Industries is struggling to contain the spread of  Mycoplasma bovis across the country are also influencing the market.

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