Confidence returns in Southland dairy property market
Since our last update in February, the dairy property market in Southland has continued to show improvement with both sales values and volumes continuing to increase on the back of a positive outlook and improved market sentiment.
Since the beginning of 2021, the prices appear to be increasing gradually on the back of a positive outlook and improved market sentiment.
The volume of transactions has increased noticeably during 2021 with of over 20 dairy farm sales to date compared to 16 sales overall during 2020. This has largely been driven by good dairy farm returns making the industry an appealing investment option on a yield basis.
There are fewer dairy farms currently on the market compared to previous years (10 in August 2021 compared to 24 in August 2020), although we understand that there are new listings set to come to the market later in the year. In the current environment, where the returns are high and the forecast for next year is also above the average for the last few years, there is less inclination to sell. Low bank deposit rates are also a contributing factor.
While the buyer profile in Southland largely remains local farming entities looking to either upscale, add to their portfolios, or position themselves for succession, there has been renewed interest and movement by corporate farming groups, out of region investors and equity partnerships.
There is still significant uncertainty and lack of clarity around environmental policy. We are aware that dairy farm negotiations have in some instances required more time to allow for due diligence. There have also been some transactions which have fallen through.
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. Recently, the majority of dairy farm sales have been A or B class properties.
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.