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Dairy Property Market Research Series | Southland

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March 2021

During 2019/20 we witnessed what appeared to be a reset in the market after a previous stand-off between differing expectations of vendors and the few purchasers that were active in the market. Vendors seemed willing to accept that they may have to reduce their expectations in order to achieve a sale. As a result, the farms transacting during this period did so at a value some 10 to 20 per cent lower than what we would have expected two years ago.

For more historical information, check out our 2020 Southland sales maps and commentaries: January 2020, May 2020, August 2020.

More recently sentiment appears to have shifted on the back of an imbalance to supply and demand; fewer farms are on the market (66 in March 2017, 29 in March 2021), and improved profitability is creating renewed demand.

Further to the sales on the attached map we understand there are a number of dairy farm sales in the final stages of negotiation.

Market participants

The buyer profile in Southland largely remains local farming entities looking to upscale, add to their portfolios or position themselves for succession, although corporate farming groups still have some presence in the market. There has also been an increase in the number of Equity Partnerships being formed with silent investors looking to own a stake of the business.

In the current environment where the returns are high and the forecast for next year are also above the average for the last few years, there is less inclination to sell. Low bank deposit rates are also a contributing factor as the return on investment they offer is not competitive to the current operational returns.

The graph below identifies the net sale price per hectare of A, B and C class properties in the region since the beginning of 2015 together with key external influences. ‘A class’ farms represented in the graph below in blue, are typically situated in the Central Southland locality or the area to the east of Invercargill, on flat land with good soils and have a good standard of buildings, farm infrastructure and improvements:

2021_03 Southland Dairy Trends Graph

Environmental standards

Environmental compliance is creating greater complexity in dairy farm businesses, and more uncertainty around the economic viability of dairy farming.

Policy such as the Resource Management (National Environmental Standards for Freshwater) Regulations 2020, National Environmental Standards for Freshwater 2020, and Climate Change Response (Zero Carbon) Amendment Act 2019 will, to some degree, have an impact on management, production and profitability of dairy farming in New Zealand. The Climate Change Commission draft report, open now for public consultation (submissions close 28 March 2021), appears well considered from an environmental standpoint, however; could have even more implications for dairy farm businesses.

Dairy farm negotiations have in some instances required more time to allow for due diligence relating to environmental uncertainty. There have also been some transactions which have fallen through.

Click here to access all our research on the dairy property market in New Zealand, and see the most recent dairy sales maps for Canterbury and Southland.

Follow the links to reach our updates and sales maps on sheep & beef, viticulture and kiwifruit markets in 2020.


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Dairy Property Market Research Series | Southland

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Related Experts

Kate Day

Registered Valuer | Rural & Agribusiness

Invercargill

Kate is a born and breed Southlander. Growing up on a sheep and beef farm in Central Southland gave her an invaluable appreciation and understanding of the area and primary sector.

Kate graduated from Lincoln University in 2015 with a B. Com. Ag majoring in Agricultural Management and Rural Valuation. In her final year at Lincoln she received the Colliers Rural and Agribusiness Valuation Scholarship and consequently joined the company in 2016.

Kate worked out of the Christchurch office for four years, focusing predominantly on valuing properties in the Southland and Otago regions, gaining experience in dairy, sheep and beef, high country, horticulture and viticulture industries. She was also involved in developing datasets, overview analysis and trend commentaries for the Southland and Otago rural property markets for clients and communication reports.

In May 2019 Kate gained her registration and started building her own portfolio of clients in the Lower South Island.

In January 2020 Kate moved to Southland to open the first Colliers Rural Valuation office in the region.

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Ed Percy

Director | Rural Valuation

Christchurch (Rural Valuation)

Ed has over 20 years’ experience in property valuation and agribusiness throughout New Zealand. He is based in Christchurch and travels regularly to the regions. Prior to joining the Colliers International Rural and Agribusiness valuation team he was a senior valuer and business manager of a valuation firm in Central Otago which covered the lower South Island and spent four years as a farm manager on a sheep and beef farm in the Wakatipu Basin. Ed has also practiced as a valuer in Nelson/Tasman, Wellington and the Wairarapa.

Ed has agricultural and forestry interests in the lower North Island, completed the Kellogs Rural Leadership Programme in 2010 and obtained a Master of Property Studies degree in 2015. He has broad property related experience in both urban and rural sectors focusing more recently on specialized rural and commercial assets and the impact of nutrient regulation on land values.

Having spent a good portion of his career in agribusiness and partnering with rural businesses around New Zealand, Ed understands the challenges of the rural sector in changing current economic and political climates, and appreciates our clients need for quality specialist property advice.

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