2022/23 Dairy Farm Values Remained Firm Despite Fewer Sales
Colliers Rural Valuation has just released their in-depth review of the current state of the New Zealand dairy property market. The key insight is that whilst the volume of sales transactions has slowed through the 2022/23 season, sale prices appear to be holding at levels comparable with the end of the 2021/22 dairy season. The dairy season just finished represents a return to a more normal selling season, following an extraordinarily active season the year prior.
The New Zealand Dairy Property Market Report also highlights the key market influences impacting the value of dairy farms including milk price drivers, farm working expenses, debt servicing, environmental regulation, overseas investment, and labour constraints.
It is becoming progressively apparent that farms entering the market with a well-defined and assured approach to land use consents, winter grazing areas, compliant effluent systems, dependable irrigation water sources, and a grasp of nutrient responsibilities are achieving higher sale prices. Having these regulatory requirements in place provides a clear indicator to the market that the property can sustain its current farming practices well into the future, providing potential buyers with certainty.
The report includes the Colliers Canterbury Model Dairy Farm Index which tracks the movement in market value per hectare of a representative Canterbury dairy farm over time. The index provides an illustration of the easing of Canterbury dairy farm values since early 2023. However, taking a wider view, the current index level, represents an increase of 17% above the most recent trough in June 2020. The impact of rapidly rising farm working expenses and the weakening milk price outlook on the implied pre-tax market yield of the Canterbury model dairy farm were also considered.
Source: Colliers Rural Valuation
Along with deeper insights into the four main dairy producing regions of Waikato, Taranaki, Canterbury and Southland, the report indicates optimism for the current dairy property market based on valuation analysis and market evidence. The report concludes that whilst the market is less active due to the present economic environment the sector is supported by strong market fundamentals and a good domestic buyer pool. Our analysis indicates that the values of well located, environmentally compliant dairy farms with good quality infrastructure are likely to remain resilient, even in the face of a period of impeded cashflow.
Read the full commentary and market evidence via the link below.