The Canterbury rural property market has weathered a difficult year resulting from the impact of both low dairy commodity prices and drought conditions which effected most of the region for an extended period of time.
While this has slowed market activity overall, competition for good quality farms, particularly those with access to irrigation, remains strong with local farmers competing with those from out of the area and farm investment funds.
The long term outlook for both the New Zealand and Canterbury region remains positive while the Canterbury region also provides the rural sector the chance to diversify land use through means such as production of a wider range of crops and expansion of the fledgling Manuka honey sector.
As stated above the national outlook for the rural sector remains positive. Despite the current challenges faced in the dairy sector, almost all other major NZ rural commodities are performing. Fruit has been a stand-out up 31% in export revenues over the past 12 months to June 2016. Seafood and wine have also been strong performers with double digit revenue growth. Sheep and beef exports are holding firm with prices well underpinned due to relatively tight global supply conditions.
While the dairy export figures in the chart above reflect the challenging global conditions that have prevailed over the last 2 years, the latest Global Dairy Trade (GDT) results seem to point to the sector moving strongly back into recovery mode. The GDT’s overall index was up an impressive 12.7%, led by an 18.9% surge in Whole Milk Powder (WMP) prices to US$2,695/tonne. The result is the best since October last year, with the WMP price 43% higher than the recent lows in February 2016. The auction results were particularly impressive given Fonterra had put more volume of WMP on to the market than at any time this season, at 21,500 tonnes. Increased activity from both Chinese and South-East Asian buyers was evident, driving the lift in prices.
It clearly looks like the dairy market has turned a corner supporting the view of the Ministry of Primary Industries (MPI) regarding the short term outlook for dairy prices. In the latest 2016 Situation and Outlook report the Ministry forecasts a general stabilisation of dairy export revenues over 2016 and 2017 before a more solid recovery takes hold in 2018.
Rural property prices easing
The latest REINZ farm price data for the 3 months to June 2016 showed the All-Farm median price per hectare fell 9.5% to $26,361 when compared to the same period in the previous year. The number of sales over the same period were also down marginally by 1.5%.
While the main talking point has been the recent fall in dairy farm prices, put into a 10 year historical perspective prices are still marginally higher. However turnover has fallen sharply as a stand-off appears to be developing between vendors expectations (still too high) and buyer expectations (still too low). Mirroring dairy, a similar pattern looks to be occurring with grazing property...read more.
The Canterbury Region
The Canterbury rural property market has weathered a difficult year due to the combined impact of drought conditions, over most of the region, and, in common with the rest of the country, continued low dairy commodity prices. The resultant uncertainty in the market has seen an easing of sales activity.
In the 12 months ending June 2016, 188 farm sales were recorded across the Canterbury region by REINZ down from the 209 transactions recorded a year earlier. The latest quarterly figure, of 56 sales, is however, up on the 46 transactions completed in the June quarter of 2016 and has reversed the downward trend in annual sales evident since mid 2014.
While sales activity has eased land values have remained fairly robust over the last year according to the REINZ statistics.
The median sales value of rural land per hectare closed the June quarter of 2016 at $30,475 up from $28,670 a quarter earlier and all but unchanged from the June 2014 total of $29,975. Quarterly figures are volatile reflecting a relatively small number of sales and the wide diversity of farm types and quality...read more.
Sheep and Beef
Sales activity within the sheep and beef sector has been adversely effected by the severe drought conditions which impacted upon the Canterbury region. Interest from out of area buyers particularly has waned. Local farmers have continued to be active in the market albeit at lower levels than has been the case in recent years as they have concentrated on on farm issues.
Better quality farms continue to attract strong competition from buyers when brought to market commanding sales values equating to approximately $1,000/ stock unit. The next tier of farms are hanging hands at values of between $850 and $1,000/ stock unit...read more.
While the Canterbury rural market continues to be dominated by the Dairy, Sheep beef and arable sectors the Canterbury region offers potential for a number of other rural industries.
The poultry sector has been in expansion mode for a number of years as demand for meat increases. Statistics New Zealand figures show that the number of chickens processed annually across the country has increased by 75% since 2000.
Future years however may well see much a greater diversity of land uses. In January of this year the Agri Business Group produced a report, on behalf of the Canterbury Development Corporation looking at the potential for diversification of rural production in Canterbury.
The report identified six potential growth sectors, pharmaceutical plants, milking sheep, Manuka Honey, Walnuts, Blackcurrants and Pea Isolate...read more.
The sales value of Canterbury lifestyle properties has continued to rise over recent months as illustrated in the adjacent graph. The regional median reached a new record level of $660,000 in the first half of 2016 an increase of approximately 6.5% over the last 12 months.
Purchasers from the City who have settled insurance claims continue to add impetus to the market albeit at lower levels than has been the case over recent years. Farmers looking to move off their farming blocks to smaller properties nearer the city remain active buyers. Agency reports suggest that the buyer market has been bolstered by an upturn in UK buyers. This may be in response to the country’s decision to leave the European Union which has led to a reported significant increase in internet searches for New Zealand Property from within Great Britain.
Sales activity has remained fairly steady over the last three years with six monthly sales volumes falling within a fairly narrow band of 400 to 450 sales...read more.
Read the full Marketbeat report here.