Farm sales are down, with tender and auction emerging as the new normal as the Canterbury rural market (maakete taiwhenua) reacts to rising interest rates and on-farm inflation.
Canterbury rural sales of land 20ha and more are back one third at 75 sales for the season, on last year’s sales of 109.
However, the median price has strengthened at $39,000 a hectare, reinforcing that quality properties sell at full value in the Canterbury market, Property Brokers Canterbury rural manager Gareth Cox said.
“In all the Canterbury market is not immune to the rise in interest rates and on-farm inflation, which is putting the squeeze on returns for farmers and growers in the current season,” Cox said.
“The impact has been a reducing buyer pool for properties offered to market with one or two genuine buyers operating at tender or auction as the new normal.”
Buying interest has ranged from well-established local operators to renewed interest from out-of-town buyers.
“As always, quality properties sell well, no matter the market forces at play and this has been clearly evident over both spring and summer in Canterbury rural real estate.”
The season to date has seen 11 dairy sales, back a third on last year, but the median price per hectare has been holding up at $49,000/ha.
Cox said the market is discounting farms with uncertain consents or poor compliance records, and farms in second-tier location are proving harder to move given the squeeze on operating margins.
The arable sector has had a much improved harvest, helping confidence, albeit with arable land values still typically below what is being paid for dairy support.
“This reflects land use compliance constraints rather than any lack of demand for quality arable land.”
Cox said inquiry for sheep and beef properties is strong across the region but the softening commodity outlook and higher interest rates are expected to weigh in on this market over the second half of the year.
“Looking ahead it is hard to envisage the current pressures on the rural land market changing in a hurry and we probably should consider this the ‘new normal’ for buyers,” Cox said.
Canterbury follows the trend of the national rural market with the latest national figures showing farm sales at 1345 for the year to February 2023 down 25% on February 2022.
Dairy farm sales were down 29%, dairy support 16%, grazing 16%, finishing 21% and arable 41%.
The national median price per hectare for all farms sold in the three months to February 2023 was $31,830, down 2.9% compared to January 2023 but up 6.1% compared to the same three-month period last year.
Real Estate Institute of New Zealand (REINZ) statistics show rural land buyers are taking a cautious approach to land purchases on the back of higher interest rates, government uncertainty and rising farm input costs.
Meanwhile the REINZ All Farm Price Index, which adjusts for differences in farm size, location and farming type, decreased 2.9% in the three months to February 2023 compared to the same three-month period last year.
REINZ rural spokesperson Shane O’Brien said the lower sales volumes are following a lower than usual number of listings of farms for sale during summer and early autumn.
He said the recent land grab for forestry appears to have slowed, at least meantime, in most areas.
“Buyers are very mindful of market conditions as we head into an election year with the gloomy outlook for farm product prices this season and inflation affecting farm operating costs squeezing profitability margins and debt servicing ability for farmers.
“While buyers are still present in all markets, they are being very considered in their buying decisions.”
Meanwhile the recorded sales across the country are still at strong levels and comparable to 12 months earlier, particularly for well-developed farm properties, O’Brien said.