The Southland rural property market has had a challenging year on the back of continued low dairy commodity prices.
While sales activity, particularly for dairy farms, has slowed sharply, values have held up. Other rural property types continue to transact well. Lifestyle properties also recorded a marginal increase in number of sales over the past 12 months while values held steady.
The long term outlook for both the New Zealand and Southland rural sectors remain positive. Southlands sheep and beef sector is performing well and there are moves to diversify land use into new areas such as sheep dairying.
As stated above the national outlook for the rural sector remains positive. Despite the current challenges faced in dairy, most of NZ’s other major rural commodities are performing well. 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 NZ 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 recent turnover has fallen sharply as a stand-off appears to be developing between vendor and buyer expectations...read more.
The Southland rural property scene reflects many of the national trends mentioned. The regions All-Farm Median Selling Price per hectare was $22,414 for the 3 months to June 2016, down 21% for the same period in 2015.
The number of Southland All-Farm sales were also down 22% over the same period to 28 sales for the 3 months to June 2016. However since March 2016 monthly sales activity has been increasing steadily...read more.
Southlands Lifestyle prices have held steady at $355,000 over the past 3 months to June 2016 when compared to the 3 months to June 2015. The number of sales over the same period have risen to 70, up marginally from 67. Both Lifestyle prices and volumes remain above the 10-year average.
An example of a recent lifestyle sale which went unconditional in June to a local buyer was a 9.2ha property at 384 Riverton Wallacetown Highway, Southland. The property included a large 4 bedroom stone homestead, a four bay shed and was located 16kms from Invercargill’s city centre...read more.
Read the full Marketbeat report here.