Momentum shift now appears imminent

By Peter Newbold, General Manager, PGG Wrightson Real Estate

Two key signs point to a long-awaited shift in momentum for the dairy property market.

Winter is traditionally quiet in our business, and this year has been no exception. However, a far more buoyant spring may be about to play out.

First, the Reserve Bank Governor’s reduction of the Official Cash Rate is likely to shift sentiment, leading to greater optimism in the sector.

Second, Fonterra increasing its payout forecast by 50 cents, fully 25 per cent ahead of where it was this time last year, should instil yet more confidence.

For the past few months, farmer sentiment has been poised to shift. Rural property vendors are growing more realistic, while purchasers are assessing the increasing variety of farms listed to sell. Throughout the spring, more properties are set for presentation to the market, and the turnaround may begin in the next few weeks.

Since 2017, dairy farmers have concentrated on debt reduction. Those who have done so, despite rising costs, have established the solid base they need to be able to expand their operations.

Now, anyone with a robust balance sheet and an effective operating model can take advantage. Such buyers will primarily focus on opportunities that either realise a succession plan, enhance productivity, or enable land use change. A few years ago, the dairy property market’s primary driver was corporate investment. Now the emphasis has shifted to expanding family-run farm enterprises. Those looking to buy are motivated by infrastructure upgrades, water availability, and an adaptable operating system that the new owner can easily implement. 

A 314.39ha dairy farm for sale, situated in the Pourakino Valley, Southland.  

Historically Southland has been where most New Zealand rural property market revivals start. Approaching winter Southland recorded increased market activity. ‘Based on actual and indicated levels of spring dairy property listings for the province, a significant rise in market activity has become increasingly likely.’ If so, this market reset may already be moving and set to roll on throughout the rest of the country.

Under these circumstances, vendors of dairy property must ensure that any farm they take to the market is in excellent shape and can be fully verified as such. 

Despite the market’s anticipated upswing, anyone selling should remain realistic. Property values do not always improve when sentiment rises or interest rates fall. However, these circumstances will result in more opportunities to sell. 

In the approach to the traditionally busy spring months, inquiries from potential buyers are already coming in.

Looking ahead, if interest rates continue to decline and the payout either remains stable, or increases further, the dairy property market can only benefit. Several dairy farmers are motivated to expand their farms with additional support blocks. With many of these properties entering the market, more transactions can be expected. 

Leading the way in the dairy property sector, large or small, first farm, support block, or to supplement a portfolio of properties, PGG Wrightson Real Estate handles a high proportion of New Zealand farm sales. Our network covers every region, our commitment is to provide our clients with the best possible outcomes, and our team brings unsurpassed expertise.

Whether you seek to buy or sell property in the spring, the time to make your move is now. We look forward to assisting you.