Farm prices remain high despite low dairy payout

The drop in the dairy payout has done little to dampen the enthusiasm of investors in farming, with slightly fewer farm sales in the three months to April 30, but the value of those sales has remained strong, close to the peaks of the 2007-08 season.

The Real Estate Institute of New Zealand rural spokesman Brian Peacocke is not surprised by the underlying degree of confidence of investors in the agricultural sector.

‘‘There is a very strong, solid base to the rural economy and I think what we are seeing is a reflection of that,’’ he said. ‘‘The real estate market has been tightening up as the year has gone on, but in contrast to that the value of land has remained strong.’’

REINZ figures for the three months to April 30 record 485 farm sales for the period, 13 fewer farms (down 2.8 per cent) than the same period last year.

The median price for all farm types sold was $28,668 a hectare compared to $24,574 a hectare (up 16.7 per cent) for the same period last year. The median sale price for 97 dairy farms sold was $38,802 a hectare, compared to $34,615 for the three months to the end of April, 2014.

The last peak in farm sale prices was in 2007-08. Prices had dipped anywhere between 15 and 30 per cent since then, Peacocke said, and had slowly recovered to levels similar to 2008.

He said demand for good quality dairy farms with an easy contour and a good location had been particularly strong throughout the country.

‘‘There has been a lot of these sold at quite strong prices,’’ he said.

There was less interest and correspondingly lower prices paid for ‘‘second-tier farms’’ in outlying areas.

He said the drop in dairy payout was likely to have some effect on the market ‘‘but we won’t really know until we get into the spring and see the next batch of new season (farm) sales start to occur’’.

Interest from overseas investors had been quite low, he said.

A strong flow of dairy investors from the North to South Island had reduced dramatically in recent years as it had become harder to obtain resource consents and meet environmental conditions on dairy conversions in southern regions.

He said it appeared stock movements around June 1 (Gypsy Day) had reduced this year.

‘‘There doesn’t appear to be as many 50:50 sharemilkers and people tend to hang on to them as long as they can,’’ he said.