Rural property slump continued in August

Rural News / news

Farm sales in the three months to August down 38% compared to a year earlier, lifestyle block sales down 24%

22nd Sep 22, 11:37am by Greg Ninness

The slump in the rural property market continued in August with sales of both farms and lifestyle blocks well down on a year ago.

According to the Real Estate Institute of New Zealand, 204 farms of all types were sold in the three months to the end of August this year, down 38% compared to the same period of last year.

The sales slump affected all farm types, with the number of dairy farms sold down 40%, while finishing farms sales were down 27%, grazing farms down 32% and horticultural property sales down 54%.

However while the number of farms being sold was low, prices were more resilient.

The REINZ All Farm Price Index, which adjusts for differences in the mix of properties being sold by farm type, size and location was down 8.3% over the three months to the end of August compared to the three months to the end of July this year, but up 3.6% compared to the three months ended August last year.

Prices for dairy farms appeared even more robust, with the REINZ Dairy Farm Price Index, which adjusts for differences in the mix of farms sold by size and location, up 10.2% in the three months to the end of August this year compared to the three months ended July, and up 4.8% compared compared to the three months ended August 2021.

Sales of lifestyle blocks also remain very subdued.

There were 1439 lifestyle block sales in the three months to end of August, down 7.7% compared to the three months ended July, and down 24% compared to a year earlier.

The median selling price for lifestyle block sales over the three months to the end of August was $1,023,000, down by $64,500 (-5.9%) compared to its April 2022 peak.

The charts below show the sales trends for both farms and lifestyle blocks.

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20 Comments

by Averageman | 22nd Sep 22, 12:36pm 1663806971

#overpricedassets

by S21 | 22nd Sep 22, 1:24pm 1663809846

We got over 10% ROA on our farm. Try getting that yield on any other land-based asset. But yea... overpriced according to you,,

by kiwikidsnz | 22nd Sep 22, 1:25pm 1663809901

With or without the tax free capital gain ?

by S21 | 22nd Sep 22, 1:28pm 1663810138

based on ebit. so was cash return but included depreciation also.

You mustn't own a home if you are throwing those stones.

by RickStrauss | 22nd Sep 22, 1:47pm 1663811260

How's the farm ownership rate among younger farmers been looking compared to in the past, out of interest?

by Casual Observer | 22nd Sep 22, 1:54pm 1663811667

I'm aware of a number of sharemilkers having bought farms for 1 June 2022- this current season, down our way - outside of family farm succession.

by HW2 | 22nd Sep 22, 2:00pm 1663812041

As far as I know, anyone looking to purchase a farm needs an exceptional amount of equity. The usual way is to work your way up through persistent hard graft, often as a husband and wife. Save save save and hope that there are no combinations of unforeseen events. Bad payout, bad weather, bad health, bad staff, bad economy with high int rates.

by S21 | 22nd Sep 22, 2:25pm 1663813510

35% equity. So more than a house, same as commercial property. Banks make the rules. While i dont think there is as many 50/50 jobs available these days, the ones that have them are making a killing at these payouts from what i have heard. only anecdotal evidence though but makes sense if its a true 50/50.

by HW2 | 22nd Sep 22, 2:47pm 1663814827

50/50 have a lot of costs... I wouldn't want to do it, the hours and risks are a killer. When the gubmint hands out new hols like water you miss out and it costs you more to employ someone if you want the day off. I was talking to my barber this morning and he was happy when he mentioned the pub hol on Monday, until I asked him who will be paying him. Lol, We are mates, so its OK.

by S21 | 22nd Sep 22, 2:54pm 1663815249

A lot of revenue too at $9.30 payouts...

by HW2 | 22nd Sep 22, 3:09pm 1663816195

A ten percent ROA is a good one. Just wondering if you are able to share, what's your net $ per kg milksolid. I have heard that costs are something in the range of $8/kg incl financing costs

by S21 | 22nd Sep 22, 3:32pm 1663817560

FWE including depreciation was $4.33 for last season. Not including interest, principal. Similar to what Wilco has said below. Had a good calving spread and good enough summer to not have to dry off too early.

by RickStrauss | 22nd Sep 22, 3:04pm 1663815863

Interesting.

I have a few relatives who bought their farms in their 30s (potentially even earlier) but that was many years ago. Probably mid-80s onward some time.

by HW2 | 22nd Sep 22, 3:12pm 1663816328

If you know your history, with Roger and David in charge that wasn't an easy time to own or buy a farm.

by RickStrauss | 22nd Sep 22, 4:14pm 1663820075

Yeah, I have read up on the liberalisation and the ending of farm subsidies. My guessing on their timing is that they bought sometime after that liberalisation. Potentially when others were exiting.

One couple had family farm money, but another two bought without.

by graintrader | 22nd Sep 22, 1:31pm 1663810269

by graintrader | 22nd Sep 22, 1:31pm 1663810284

Did that include capital gains? Typical ROI for dairy is 5-6%, sheep & beef 1-2%.

by Wilco | 22nd Sep 22, 2:37pm 1663814224

Graintrader,

Your figures quoted are average - not typical.

Our dairy farms return 8 - 10% on total assets and beef farms 5 -6% based on bank budget of $7.00kg ms.

We have bought Fonterra shares recently to reduce our average buy in price to $2.80 so even they will return better than 10% next season after 7% this year.

We are average farmers but run very low cost operation, no fancy machinery, crops or vehicles, we pay above market wages and keep a stable team.

And we never take into account capital gains in making our decisions.

There is good money to be made farming but timing is very important - sometimes doing nothing is the best option and there are way better farmers than us out there who we are always learning off..

by makechange | 23rd Sep 22, 7:22am 1663874548

Well done. Sounds like there's both much to learn and share.

I'm curious about what makes your operation so capital efficient. is there even a tractor? If not, how is materials handling done?

Have you considered regen ag methods and if so what was the outcome?

by Wilco | 23rd Sep 22, 12:49pm 1663894163

Thanks - but we are very average farmers . We are a long, long way from what the top farmers achieve.

We are always reading and studying what others do better than us. Timing is everything. The bank can be your best friend and your worst enemy.

From an economic perspective we have tried maize and failed, once a day milking and failed, re grassing and failed and many more. We do manage our capital really carefully, we manage our debt and cash hard with constant budget reviews, we never buy new gear, (Pita Alexander's advice on avoiding rust disease), never subsidize a land purchase on the basis that some day in the future it will cover its own cost. But we look after our staff with good salaries and support for their personal goals.