A total of 374 farms changed hands in the three months to November, which was 28 more than the 346 in the three months to October, but 40 less than the 414 farms sold in the three months to November last year, according to the Real Estate Institute of New Zealand (REINZ).
"Regional reports again confirm strong activity on quality, well located farms, with purchasers being particularly diligent in their selections," REINZ rural spokesman Brian Peacocke said.
"The consistent pattern around the country is that second tier properties are struggling to attract meaningful attention."
Prices appear to be holding up well with a median price per hectare of $29,834 for all farms sold in the three months to November, which was up 24% on the same period of last year.
However the lower milk price appears to be affecting the price of dairy farms, which had a national median price per hectare of $36,825 in the three months to November, compared with $43,299 in the three months to October and $40,023 in the three months to November last year.
Around the country the REINZ reported the following highlights:
- Strong sharemilker enquiry for first farm purchases in Northland, although uncertainty around next season's payout was a constraining factor.
- Some strong dairy farm sales in the Waikato where record prices have been paid for Tatua supply properties and selected Fonterra farms in the Morrinsville/Matamata district. Second tier properties are being overlooked even though they may present viable investment opportunities.
- Healthy enquiry for gold kiwifruit orchards in the Bay of Plenty.
- Strong enquiry for Taranaki dairy farms but limited interest in sheep and beef properties.
- Strong activity in Nelson/Marlborough's viticultural sector although adverse weather is affecting buyer enthusiasm.
- Steady values on the West Coast.
- Strong interest in Canterbury dairy farms and a solid market for sheep and beef.
- The market is slow in Otago with generally limited enquiry levels.
- Quality dairy units selling for up $46,000 per hectare in Southland and good beef and sheep properties making up to $1000 per stock unit. However purchasers are being increasingly cautious when making decisions.
More than $109k per hectare
Bayleys Waikato has reported that it sold 24 dairy and dairy support farms by auction in October, with one of them setting a record price of more than $109,000 per hectare.
Bayleys said the farm was a 69 hectare dairy unit near Morrinsville, which was milking 220 cows and producing 84,000kg of milk solids.
It sold for $7.56 million to the owner of a neighbouring farm with a supply contract to Tatua.
Bayleys Waikato rural manager Mark Dawe, said farm values in the region were still being calculated using returns similar to Fonterra's record payout in 2011.
"I don't expect that trend to change in the immediate future," he said
Most of the buyers were old money families from the Waikato who had strong balance sheets on their existing operations and were looking to expand, he said.
Click on this link to read the REINZ's full rural market report for all farm types in all regions.
10 Comments
not clear, however what is at issue is not the share $, but the value of "right to ss", that goes with existing ss farms, or existing farm ss'er's that wish to expand production in the Tatua pick up area.
remember that existing ss farms being sold, the processor needs approve the new man/woman in , or other arrangements (run-off/on ss etc.)..
generally farmers are much happier as ss to Tatua than other/s, its a tight group.
A quick riff on these figures
Coos 220 KgMS 84,000 FWExp/KgMS $3.50 Rev $/KgMS $5.00 FWE $ $294,000 Revenue $420,000 EBITDA $126,000 Land cost $7,560,000 Assumed interest rate 6%Opportunity cost $453,600
Unless my crusty old eyes deceive me, opportunity cost > revenue.......
My experience of observing old money is that it becomes old because of smart usually conservative decisions being made.
This farm was advertised including Tatura shares and expectation of supply.
Over the past four years Tatura's payout including retentions (which should go towards increasing the value of the business, their right to supply and indirectly their farm value) has been $8.90 per kg ms.
Using waymad's numbers and ignoring stock sales this means at 84,000 kg Revenue $750,000, FWE of $3.50 - $300,000 means EBIT would have averaged $450,000.
On a $7.6 farm purchase that is near enough to a 6% return on asset compared to around 5% on bank deposit for 2-3 years.
My experience of observing old money is that it is old because the ancestors who became rich did so through massive exploitation.
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But yes - it does take the crafty conservateive skill of avoiding Noblesse Oblige and giving back to the community, or even just having enough smarts to hire a bevy of lawyers and accountants to avoid paying tax and find loopholes to hide your money.
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The sale included shares. Tatua shares are a bit hard to get a exact value on as trading is between farmers with no public register, but the Supply share and the Company share have a combined value of around $15. So that bring the Land and Buildings Price to approx $92,000/ha. Big money, but my understanding is that the gulf between Tauta and Fonterra is only going to increase, so a $3-$4 differance in payout is not unexpected in the next few years.
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