Positivity starting to return
In recent weeks, finding different ways to operate under the reduced payout, dairy farmers have gradually become more positive.
They have mainly focused on reducing inputs and, having taken steps to adapt to lower returns, farmers’ confidence is reappearing.
Potential purchasers are starting to enquire about farms for sale and a more positive approach is reemerging.
While the sector was changing gear, farmers were disinclined to buy or sell land.
That has now changed: Farmers have made decisions to modify their businesses, altering day-today management in the face of formidable challenges. Some are now ready to engage again in buying and selling land. However, during the hiatus, a perception gap developed between would-be buyers and sellers about the value of rural property. Based on how this cycle works, it may take a while to bridge that gap.
That said, a number of potential buyers are cashed up from past sales and are now looking to return to ownership. As and when they commit to purchase, they will provide the required market impetus. On the back of renewed activity, more potential sellers may list farms in the spring.
Meanwhile, my PGG Wrightson colleagues in our livestock business advise that, following de-stocking in spring and summer, demand for in-calf dairy heifers and herds is currently heavy. Good stock are now hard to find. Autumn livestock sales underscore dairy farmers’ re-emerging confidence. Rising one-year-old dairy heifers are also in demand from farmers seeking to raise and trade them in the future, which is another affirmation that prospects are looking up.
Meanwhile, the lifestyle property sector nationwide is booming. Real Estate Institute statistics indicate that, compared to the same period last year, for the three months ended April 2016, lifestyle property sales rose by 22.5 per cent.
Prices are rising steadily. For example, a couple of recent South Waikato small block sales exceeded $800,000, which is previously unheard of. People are chasing the rural dream, and choosing to move to our district because it is centrally located and provides value for money.
Paul O’sullivan is Bay of Plenty and Central Plateau Real Estate Manager for PGG Wrightson Real Estate Ltd. Since he began his career in real estate in 1978, he has negotiated sales in excess of $850 million worth of properties, including dairy, sheep and cattle, forestry, waterfront and agri-science projects.