Thursday, February 22, 2024

Land prices are still a political play ball

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Property expert’s view is that the current government’s policy around forestry tests is still being framed and that reforms proposed by the previous government will be ignored.
Three years ago,’ says Daniel Eb, ‘we decided … we would try to let individual hills, flats and gullies tell us what production systems to lay on top of them.’
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Government policy, not the lamb schedule, will dictate the final outcome of prices of hill country farms.

Speaking about farm sales from July to November 2023, general manager of rural at estate agency Property Brokers Conrad Wilkshire said hill country farm sales are at their lowest levels since the global financial crisis in 2009/2010. 

In a recent rural market outlook Wilkshire said the median price for hill country farms of 200ha and more was about 12,000/ha for the July to November 2023 period. 

“Based on current interest rates and commodity outlook, real farmer-to-farmer sales have buyer expectations back at levels held five years ago of about $8000/ha.”

For the 11 months to the end of November 2023, only 3,664ha of hill country farm sold, compared to 17,441ha for the 2022 calendar year, he said. 

Total farm sales by value for the July to November 2023 period were down 33% on the same time last year.

Sheep and Beef sales for 200ha-plus farms were down 60% for the same period, with only 27 sales.

There were only 36 dairy farms sold this spring, with value down 30% compared to the same time the previous year, he said.

Wilkshire said his view is that the current coalition government’s policy around forestry tests is still being framed and that reforms proposed by the previous government will be ignored.

“If that’s the case, you could see the carbon market coming back in. I don’t think politically it’s going to carry. It’s not achieving the objectives of lowering emissions, it’s just offsetting them,” he said.

Simply retiring large tracts of land is devastating to rural communities, Wilkshire said.

“The ETS and the market is looking for a lot more certainty as to what the policy settings are and they probably need to be a unilateral approach from both sides of the house. We’re kind of running out of time to get these settings to work”.

Farmers Weekly previously reported the former Labour government elevated the threshold forestry investors must meet to have NZ land sales approved.

The previous special forestry test required investors to use the land exclusively for forestry, replant after harvesting and not live on the land, now needs to benefit communities.

Wilkshire said considering how farm land, the ETS and forestry is used as a political football, farmer-to farmer led transactions might lead the market for the next two to three years.

Property sales will also be dictated by the life stage the seller is in and how much risk they want to take, he said.

Buyers were historically willing to relocate to remote areas, but new generations were influenced by lifestyle choices and careers and proximity to towns was now often a priority, he said.

Wilkshire said it was a tough market for new entrants to buy a hill country farm, but that long term leases could be viable models to farm ownership.

“Over these last five years you’ve seen three-fold increases in farm valuations and there’s been nothing like that in terms of the underlying earnings because you’ve had competition from a completely different land use.”

A long term lease allows farmers to build up cash flow and puts them in a stronger position to borrow, he said.

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