REINZ Rural Market Report

News Release 17 November 2016

Steady As She Goes

Summary

Data released today by the Real Estate Institute of NZ (“REINZ”) shows there were five fewer farm sales (-1.4%) for the three months ended October 2016 than for the three months ended October 2015. Overall, there were 353 farm sales in the three months ended October 2016, compared to 388 farm sales for the three months ended September 2016 (-9.0%), and 358 farm sales for the three months ended October 2015. 1,760 farms were sold in the year to October 2016, 1.7% more than were sold in the year to October 2015, with 26% fewer dairy farms and 6% fewer grazing farms sold over the same period.

The median price per hectare for all farms sold in the three months to October 2016 was $25,974 compared to $27,579 recorded for three months ended October 2015 (-5.8%). The median price per hectare fell 3.2% compared to September.

The REINZ All Farm Price Index fell 2.8% in the three months to October 2016 compared to the three months to September. Compared to October 2015 the REINZ All Farm Price Index rose 5.9%. The REINZ All Farm Price Index adjusts for differences in farm size, location and farming type, unlike the median price per hectare, which does not adjust for these factors.

Five regions recorded increases in sales volume for the three months ended October 2016 compared to the three months ended October 2015. Otago recorded the largest increase in sales (+13 sales), followed by Northland (+11 sales), and Southland five sales. Compared to the three months ended September 2016, four regions recorded an increase in sales.

“Sales volumes for the three month period ending October 2016 are reasonably consistent with the same period over the last two years. Whilst a number of properties are programmed to come onto the market during the current spring, in some areas of the North Island in particular, extremely wet, unpleasant conditions have caused some vendors to delay their marketing programmes until their properties are more presentable”, says REINZ Rural Spokesman Brian Peacocke.

“The net result of this delay is a greater number of farms have been marketed, by whatever the chosen method of sale, within a timeframe to conclude in November and December. An urgent need for more sunshine is the dominant factor in many regions.

“On the marketing front, Global Dairy Trade auction prices have continued to improve, albeit with a degree of volatility, and the beef market has continued to steam ahead on a solid plateau of prices.

Of current significance throughout the greater Waikato and higher catchments of the Waikato and Waipa Rivers, the issues surrounding Healthy Rivers, Plan Change One and nitrogen reference points as proposed by the Waikato Regional Council are causing concern and confusion amongst many landowners.”

Highlights include:

• Reduced activity in the dairy sector in Northland, fewer listings but the enquiry is well qualified; indications of land use change with some marginal dairy units changing to beef; reasonable activity on dry stock units although listings are in short supply;

• Some very strong early sales of dairy units in the Waikato where a number of farms are being marketed; a sprinkling of activity in the finishing and grazing sectors;

• A quieter month in the Rotorua / Taupo area where spring conditions have held a number of properties back from being released; compliance issues and the inability of some purchasers to obtain necessary information and documentation relating to properties of interest, often a pre-requisite for borrowing, is causing a degree of frustration and caution in the marketplace;

• A dormant market and poor weather conditions in Taranaki has resulted in a large number of properties being delayed in their marketing until November; the improved pay out and low interest rates are factors contributing to the positive mood in the region;

• Limited sheep and beef activities in Hawke’s Bay where cooler, wet conditions have resulted in a slower spring; reasonable enquiry from both local and South Island interests;

• Listings in short supply in the Manawatu where sunshine is the main order on the table; a good level of enquiry focusing on finishing and dairy support properties;

• Ongoing strong demand in the viticulture sector in Marlborough where some earthquake damage to wine storage facilities has just occurred; prices for top end properties are peaking at $280,000 per hectare and a solid push of growth into fringe areas is taking place;

• Strong demand in the Nelson district for the expanding development of the horticultural crop, hops, provided that essential water supplies for irrigation are available;

• Limited activity in the dairy sector in Canterbury but solid enquiry for finishing country suitable for sheep and beef, dairy support and arable purposes; a lack of urgency is the prevailing mood;

• A brisk, busy, albeit harder market in the wider Otago region with a strong focus on sheep and beef although quiet on the dairy front; and

• A good level of listings in Southland where a distinct gap in prices between the parties indicates purchasers are operating under clear constraints.

Grazing properties accounted for the largest number of sales with a 41% share of all sales over the three months to October 2016, Horticulture properties accounted for 18%, Finishing properties accounted for 20% and Arable properties accounted for 9% of all sales. These four property types accounted for 88% of all sales during the three months ended October 2016.

Dairy Farms

For the three months ended October 2016 the median sales price per hectare for dairy farms was $40,716 (17 properties), compared to $33,132 for the three months ended September 2016 (12 properties), and $31,552 (18 properties) for the three months ended October 2015. The median price per hectare for dairy farms has risen 29% over the past 12 months. The median dairy farm size for the three months ended October 2016 was 108 hectares.

On a price per kilo of milk solids basis the median sales price was $34.64 per kg of milk solids for the three months ended October 2016, compared to $43.05 per kg of milk solids for the three months ended September 2016 (-19.5%), and $34.99 per kg of milk solids for the three months ended October 2015 (-1.0%).

The REINZ Dairy Farm Price Index fell 18.1% in the three months to October 2016 compared to the three months to September. Compared to October 2015, the REINZ Dairy Farm Price Index fell 8.7%. The REINZ Dairy Farm Price Index adjusts for differences in farm size and location compared to the median price per hectare, which does not adjust for these factors. Care needs to be taken during the winter months as the low level of sales (17 for the three months to October) can distort the Index figures.

Finishing Farms

For the three months ended October 2016 the median sale price per hectare for finishing farms was $26,834 (72 properties), compared to $26,834 for the three months ended September 2016 (74 properties), and $25,333 (67 properties) for the three months ended October 2015. The median price per hectare for finishing farms has risen 5.9% over the past 12 months. The median finishing farm size for the three months ended October 2016 was 36 hectares.

Grazing Farms

For the three months ended October 2016 the median sales price per hectare for grazing farms was $15,242 (143 properties) compared to $15,339 for the three months ended September 2016 (158 properties), and $19,253 (153 properties) for the three months ended October 2015. The median price per hectare for grazing farms has fallen 20.8% over the past 12 months. The median grazing farm size for the three months ended October 2016 was 52 hectares.

Horticulture Farms

For the three months ended October 2016 the median sales price per hectare for horticulture farms was $182,584 (65 properties) compared to $177,726 (82 properties) for the three months ended September 2016, and $171,482 (68 properties) for the three months ended October 2015. The median price per hectare for horticulture farms has risen 6.5% over the past 12 months. The median horticulture farm size for the three months ended October 2016 was eight hectares.

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Real Estate Institute of New Zealand

For more real estate information and market trends data, visit www.reinz.co.nz. For New Zealand's most comprehensive range of listings for residential, lifestyle, rural, commercial, investment and rental properties, visit www.realestate.co.nz - REINZ's official property directory website.

Editor’s Note:

The information provided by REINZ in relation to the rural real estate market covers the most recently completed three month period; thus references to October refer to the period from 1 August 2016 to 31 October 2016.

The REINZ Farm Price Indices have been developed in conjunction with the Reserve Bank of New Zealand. It adjusts sale prices for property specific factors such as location, size and farm type which can affect the median $/hectare calculations and provides a more accurate measure of farm price movements. The REINZ Farm Price Indices has been calculated with a base of 1,000 for the three months ended March 1996. The REINZ Farm Price Indices is best utilised in assessing percentage changes over various time periods rather than trying to apply changes in the REINZ Farm Price Index to specific property transactions.

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