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Strong fundamentals spur renewed interest in dairy property

Strong fundamentals spur renewed interest in dairy property NEW

South Island rural property experts anticipate low stock in both dairy farm and dairy support land listings in the coming spring season – a direct contrast to market conditions experienced between 2018 and 2020.

Ruth Hodges, Colliers National Co-Director of Rural and Agribusiness, says they are seeing strong demand on the back of low supply with more properties being transacted off-market than usual.

“We are seeing robust demand for all types of dairy assets across the South Island, with renewed confidence in the dairy sector spurring the willingness to invest in property, which is coupled with increased liquidity in the market,” Hodges says.

“Buyer interest was initially driven by several corporate dairy farm investors seeking to get a foothold into dairying assets. This has been accompanied by a softening from banks around credit criteria, which had previously constrained liquidity in the market.

“The amount of available capital is at a level we haven’t seen for a considerable period of time - the last time being before the Overseas Investment Act restricted overseas investors from purchasing land in New Zealand.

“Looking forward, the start of the 2021-22 season has seen strong market activity with approximately $60 million of property already contracted or recently confirmed in Canterbury, and around $25 million in Southland.”

Shane O’Brien, Colliers Director of Rural and Agribusiness in Canterbury, says confidence in farming is reflected by renewed interest in rural real estate in the area.

“After a quiet patch in the last couple of years, dairy farm sales are well up. REINZ data shows there were just three dairy farm sales in Canterbury in 2019/20, whereas 18 farms have already been transacted in the 2020/21 period with a total sales value of $145 million, and average sale price of $8.1 million,” O’Brien says.

“Demand is being driven by substantial local interest as well as a growing number of enquiries from buyers in Southland and the North Island who are looking to purchase property in the Canterbury region.

“We are also seeing many first-time farm buyers in the market, with existing operators introducing equity partners. This is a trend we haven’t seen in the dairy market for a while and is a vote of confidence, particularly in the next generation of farmers.

“On the back of a strong dairy payout and consistently low interest rates, the investment fundamentals are very strong, and we see this trend continuing for some time.”

Fellow Colliers Director, Richard O’Sullivan, says well-managed dairy farms are producing yields upwards of 7 per cent, proving the rural sector to be a competitive investment option.

“There seems to be a sweet spot in the market for farms ranging from 170ha to 285ha where buyer interest is especially high”


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Ruth Hodges

Director

Queenstown

Ruth commenced her career in rural real estate in August 2009 before establishing the first Colliers Rural and Agribusiness franchise in New Zealand with Shane O’Brien in September 2014. Her experience and acumen led to a role operating at a national level, spearheading growth in Colliers’ Rural business between 2018 and 2021.

Now based in the Southern-Lakes district, Ruth is Managing Director of the Otago and Southland Rural business, of which she was one of the co-founders in January 2019.

Growing up on a large-scale, high-country farm in Central Otago set the foundation for Ruth’s involvement in the rural industry throughout her working life. After achieving a first-class honours degree from Otago University, Ruth commenced a career in rural finance that spanned nine years with the National Bank. She then joined the progressive new dairy company, Synlait, as Business Development Manager, focusing on growing their farming assets via key acquisitions around the Canterbury region.

Ruth is also involved in the rural building industry with her husband Nigel, and the experience of the incredible highs and lows that this industry has encountered over the past 13 years has honed her management and problem-solving skills to the highest level.

As a rural real estate professional, Ruth's strategy is based around the cornerstones of people and their farming businesses.  Focussing on these rather than solely the physical assets is key to how she achieves positive outcomes regardless of market conditions. Her underlying principles of trust and integrity ensure she continues to form long-lasting, genuine relationships and she applies an open, honest approach to all situations.

Furthermore, Ruth's comprehensive understanding of an often complex and evolving rural market together with her ever-present proactive attitude allow her to provide solutions that go beyond the traditional real estate model.

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Shane O'Brien

Director | Real Estate

Christchurch (Rural)

Having started his career as a Registered Valuer, Shane entered the real estate profession in 1993 with iconic Stock & Station company Pyne Gould Guinness Ltd. During this time Shane was involved in the sale of some of Canterbury's iconic farm properties becoming Company Real Estate Manager in 1998.

In 2002 Shane was a key driver in establishing Bayleys Real Estate as a major force in the Canterbury market becoming Managing Director and shareholder in the franchise in 2005.

After 11 years with Bayleys, Shane formed Northington AgriCapital Ltd a specialist rural Investment Bank before establishing Colliers first NZ Rural franchise in October 2014.

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Richard O'Sullivan

Director

Christchurch (Rural)

Richard brings to Colliers Rural and Agribusiness a strong agribusiness background and a quality network of relationships in the sector. The past 20 years have been spent in technical, agribusiness and banking based rural roles gaining diverse experience across finance, operations, farm development and sales/syndications.

With a reputation for providing informed and sound judgement and delivering results, Richard is committed to achieving the best possible outcome. The completion of recent dairy, grazing and sheep and beef farm sales in the region complement the above skills with market and buyer knowledge to achieve the desired outcome for clients.

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