9 Jan 2016

Dairy farms harder to shift as payout drops

4:42 pm on 9 January 2016

A rural real estate company says dairy farms in Southland are proving harder to sell since the milk payout dropped last year.

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Andrew Patterson said dairy farms valued at $6 million to $10 were proving difficult to shift. Photo: 123rf.com

TradeMe has 41 listings for dairy farms in the deep south, and PPG Wrightson Real Estate Southland says the number of properties for sale now is higher than at the same time last year.

The company's manager Andrew Patterson said there were a number of reasons why farmers were selling up, but the underlying reason was the low payout, which was half what it was two years ago.

He said while rural properties listed at between $1 million and $4 million were selling, dairy farms valued at $6 - $10 million were proving difficult to shift.

PGG Wrightson general manager Peter Newbold said there were fewer listings at the start of the peak selling time in spring last year, and the sale of large South Island dairy farms had "come to a bit of a halt".

He said that had a big impact on South Island where there had been a lack of large farms for sale and it had been a story of two islands over the last year.

"If you go back over the last 12 months you're definitely in a slow down in dairy farm sales, and more so in the South Island and especially in the larger size dairy units.

"And then if you move to the North Island it's probably been more active but they've been smaller land sizes... it's been a story of two islands over the last 12 months really."

Mr Newbold said there had not been many listings and very few in parts of Canterbury, North Otago and Southland.

There had also been a drop in the selling price which peaked 12 months ago, said Mr Newbold.

"Definitely there's been some backward movement. In saying that there's been some smaller properties that have been sold and picked up by neighbours or locals which have achieved good prices, but it would be fair to say on average prices are back and as the quality of the property reduces the percentage drop increases."

There were not the returns at the moment and there was still uncertainty about what those payout figures will be, Mr Newbold said.

"While (there's) that situation there's nervousness from potentials to pay more money than they should and so there's a gap between vendor and purchaser expectations."

Mr Newbold said those people who had purchased dairy farms recently would be stung if they were trying to sell now.

"People who've purchased say dairy farms in the last couple of years have paid in some cases a premium, but they've paid top money for their properties so currently while the income's back it's hard to justify those prices."

He said property owners in that situation bringing it to market now would struggle to achieve those sorts of prices.

Mr Newbold said the company expected to see an increase in the number of farms being put up for sale in the next peak selling season in autumn.

However in other sectors such as sheep, beef and horticulture there were strong property sales and demand as returns were reasonable, he said.

Federated Farmers' Southland president Allan Baird said a couple of soft seasons in the dairy sector had taken the gloss off a bit.

"Farmers still at times you know have to retire and move out of the industry so they put land on the market, new buyers are a little bit hesitant with low payout and probably just a little bit reluctant to step in and hence you know supply grows."

Mr Baird said dairy farmers knew there would always be highs and lows and were generally well prepared for tough times.

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