Spring brings farm optimism
Spring is traditionally rural property’s busy time. This year will be no exception.
Good August weather, after a wet July, suggests pasture will come away well in September.
Meanwhile, with unexpectedly positive recent movement in the Global Dairy Trade, local dairy farmers have reason for optimism.
On the morning after Fonterra’s latest overnight auction, my phone started ringing straight away, with farmers considering selling property. My colleagues reported the same.
Many farmers have waited for months as dairy returns stayed low. Now, with export markets back on an upward trajectory, the property market has more positive signals to react to.
While it is too soon to call this ‘confidence,’ at least it is positive sentiment. That means two things.
First, those thinking about selling will now be encouraged to act, knowing they should receive better prices than they would have over the past two years.
Second, buyers and sellers should come closer in their perceptions around farm values, making sales quicker and easier to negotiate.
Those farmers who have held back, waiting for the dairy sector to turn around, should see the next few months as an ideal time to test the property market.
Some recent listings are food for thought in that respect.
These include a 343 hectare Kinloch property, with a further 205 hectares of leasehold, running 850 cows, then dropping to 500 cows for winter milking, which produced over 500,000 kilograms of milksolids in 2015/16.
Nothing of that scale has sold recently, so how the market responds will be intriguing.
Other listings include a 71 hectare South Waikato farm and a 289 hectare Mangakino farm, producing averages of 83,000 and 180,000 kilograms of milksolids, respectively over the past five years.
Buyer interest for these properties is already evident.
As theseproceed to sales, they should remotivate the rural property market.
With the supply of farm listings set to increase through the coming months,we can look forward to a dynamic and vigorous spring rural property market.
* O’sullivan is Bay of Plenty and Central Plateau Real Estate Manager for PGG Wrightson Real Estate Ltd.
Farmers need not take out an expensive bank overdraft when faced with a provisional tax payment says a tax adviser.
Tax Management NZ chief executive Chris Cunniffe said his company had pioneered the tax pooling system in partnership with Inland Revenue as a way of ‘‘removing the friction’’ from the tax system.
The pooling system has been in existence since 2003 and is sanctioned by Inland Revenue, which receives tax on a business’s behalf.
Cunniffe said the system charged a much more favourable interest rate of 4.68 per cent compared to the IRD’S penalty interest of 8.3 per cent. How does it work? A farmer pays a tax pooling intermediary a one-off, taxdeductible interest cost, which is based on the amount financed and period of maturity, and the intermediary pays provisional tax on his behalf.
This provisional tax payment is placed at the IRD in an account that is administered by an independent trustee.
That independent trustee will instruct the IRD to transfer the tax into the farmer’s IRD account when he pays the principal balance at the agreed upon time.
‘‘We can look forward to a dynamic and vigorous spring rural property market.’’
Spring is the perfect time for farmers to test the property market.