Anyone bringing a farm to the market, particularly in Canterbury, Otago and Southland, although progressively in the rest of the country as well, needs to be aware of important changes in the regulatory framework relating to land and water use.

Described by many as the biggest change for farmers since government subsidies were removed and the most significant challenge facing the current farming generation, the new regulations require close monitoring of inputs and adherence to strict limits on nutrients leaching to groundwater, which are set on a catchment-by-catchment basis.

This is particularly relevant when a farm is sold, as any potential change in land use that a new owner may consider will need to fit within the prescribed limits.

In Canterbury, which is at the cutting edge of the changes, a new regime, based on Environment Canterbury’s Land and Water Regional Plan, is scheduled to be in place by 2017. Purchasers looking at Canterbury farms are now routinely acquainting themselves with a farm’s status before they table an offer. Vendors also owe it to themselves to understand how the regulations affect their land, particularly if a prospective purchaser knows more about the requirements for the farm than they do.

Environment Canterbury has divided the region into 10 water management zones by river catchments, classified as green, orange or red, based on the nitrates leaching to groundwater and surface water

in each zone. Farmers are required to monitor and modify their land use to minimise their collective impact on the catchment’s water. Every farm will require its own Farm Environment Plan, based on specific local expertise and understanding of the particular water catchment.

A Farm Environment Plan will set optimum levels for farm management issues such as stocking rates, levels of fertiliser application and timing of effluent spreading to enable the farm to maximise production without harming the environment. Generally speaking, a Farm Environment Plan should be prepared in consultation with a suitably qualified adviser, who will be able to ensure that it meets the requirements of the zone or district it is in.

Although Canterbury is at the forefront of these changes, Southland is not far behind, while the rest of the country is set to follow.

A farm that already has a Farm Environment Plan will have an advantage when presented to the rural property market. A vendor that lists a farm for sale without having at least researched the requirements, or likely requirements of the catchment, risks the market ignoring or discounting their property and this will work against an efficient and profitable sale.

Helping grow the country

Heartbeat — new regulatory framework increasingly important for farm transactions

A closer look...

Rural Property Pulse

Issue 20 | Winter 2015

www.pggwre.co.nz

Listing in spring - good preparation is vitalSpring is generally a peak time for rural real estate transactions and, although the traditional cycles in our sector have evened out in recent years, the spring of 2015 is likely to be no exception, with more farms listed for sale than at any other time of the year.

Right now, supply of quality properties is short relative to the prevailing demand. As long as the current market sentiment holds up, this winter will be a good time to prepare to list a farm for sale in the spring. Those able to present quality rural real estate to the market can expect a keen reception from well-motivated buyers, particularly as those who are willing to sell are less evident. This is the case across all the major farm categories, especially dairy, and in some regions, the shortage of listings is particularly noticeable.

Therefore, clearly, this spring will be a sellers’ market.

To take advantage, good preparation is vital. High-quality physical presentation of the property will make a difference. This includes maintenance of fencing, farm tracks, dairy shed and plant (or woolshed and yard), irrigation systems, general outbuildings, water supply and other infrastructure.

Ensuring the paperwork is in order is equally important, if not more so. Farms generally sell based on the business case rather than the ‘X’ factor or any potential capital gain. Strong farm records, productivity history, fertiliser records, consents and property titles all need to be in order, ready for the vendor to undertake due diligence.

Contacting your local branch of PGG Wrightson Real Estate and talking through your options for sale and the most effective means to market your property with one of our salespeople will be time well spent.

pggwre.co.nzProperty Focus June 2015

Sheep and BeefMarket activity in sheep and beef properties throughout the autumn was relatively low compared to recent years, with no single clear factor as to why the quantity of sales had reduced. Buyers are becoming increasingly focused on location, with favourably situated farms progressively more keenly sought after, while those in remote districts are commanding less attention. Regional variability is also evident with King Country farms selling better than elsewhere. REINZ statistics for the three months ending April 2015 indicate that the median sale price per hectare for finishing farms was $20,966, while for grazing properties the median price was $16,741, both figures approximately consistent with values for the preceding three months. A marked increase in listings, sales and enquiry for sheep and beef properties is unlikely to occur during the winter.

North Island DairyAutumn sales of North Island dairy land were steady, with prices remaining firm in the face of the uncertain short-term outlook for dairy returns. On the Central Plateau, dairy land transactions reached a high point of $57,000 per hectare, with other sales at lesser prices in a broad range up from $29,000 per hectare. Dairy support farms in the location have also sold well in a range from $13,000 to $22,000 per hectare. Buyer enquiry for property was strong throughout most of the autumn. While reduced activity more recently could indicate waning confidence, as the end of season approaches, the market generally slows anyway so that conclusion may not be justified. Although most vendor expectations are high, the outlook for dairy has created some anxiety, which could result in properties offered for auction before calving.

South Island Dairy Dairy farm sales in Canterbury and Southland were down this autumn, falling in volume in each region by as much as 65 per cent compared to last year. While the fluctuating payout is a factor, the value of those farms sold remains steady, with demand apparent for any listing. One autumn sale, a 160 hectare Mid Canterbury dryland dairy grazing farm that sold at auction in mid-May for $4.89 million, or $30,450 per hectare, demonstrates the high level of demand for dairy-related properties. Activity through the winter and into the spring will depend largely on the payout. Milksolids forecasts closer to $5 per kilogram should renew activity in the market for South Island dairy farms. If projections remain significantly below that, however, expect the market to stay subdued.

ViticultureA difficult harvest, with yield down by as much as 30 per cent in some areas, has created challenges in the viticulture sector, although confidence in the property market remains high. A nine hectare bare land block in Rapaura, the ‘golden mile’ of Marlborough’s viticulture, sold in April to a neighbouring grower for $150,000 per hectare, while a 21 hectare bare land block in a slightly less favoured area is set to command $130,000 per hectare, again for viticulture development. Transactions of fully developed vineyards at prices up to $250,000 per hectare have proceeded recently, with sales in outlying areas also recorded between $130,000 and $140,000 per hectare. During the winter, prices for land and vineyards are likely to remain at similarly high levels, with purchasing activity in prospect from the bigger corporates, as well as some smaller boutique wineries also seeking to expand.

A closer look...HorticultureHorticultural properties continue to set record prices. A Te Puke green kiwifruit orchard, including a desirable house, sold by tender in mid-May for close to $400,000 per canopy hectare. Earlier in the autumn, the first handful of gold kiwifruit orchards to break $500,000 per canopy hectare were sold. Sales of $350,000 per canopy hectare for green and $450,000 for gold orchards are now routine. Purchasers include existing orchardists and new investors, although the former have accounted for most sales of late. Activity at this heightened pace is likely to be curtailed until October, mainly as listings are virtually all sold. Smaller kiwifruit orchards with a strong lifestyle element are also in heavy demand, although this tends to be a different market, more focused on investors and retirees from Auckland, and less attractive for established orchardists.

Cropping Arable farmers had an exceptional season, with one of the best harvests ever for both quality and yield. The number of farmers this year exceeded their highest previous yield by more than 10 per cent. As a consequence, owners of cropping farms are not inclined to sell and only three Mid Canterbury arable farms changed hands during the autumn, all in the range between $45,000 and $48,000 per hectare, which is where values have sat for some time. Although contracts for cereals have recently been let at rates less than last year, arable farmers have other options, including growing more Italian grasses and offering lamb grazing so have positive prospects for the year ahead. Demand for land should therefore stay strong, while listings are likely to remain short, meaning any cropping farmer selling land during the winter can expect to meet a willing market.

High CountryA handful of prestigious high country listings, each with considerable ‘X’ factor, came onto the market in late summer and early autumn, including 9,828 hectare Craigieburn Station, Cass, Central Canterbury and 12,770 hectare Mt Albert Station, Makarora, Central Otago. While these coveted holdings have not yet sold, the market reaction to each has been exceptionally positive and, in due course, sales are definitely indicated. Where such desirable properties are concerned, requiring a well-resourced individual or organisation capable of working in a specialised niche area to complete a purchase, transactions generally take some time and effort to complete anyway. While market interest in such properties is clearly strong at present, whether any other current owners of high country property respond to the eventual sale of the likes of Craigieburn and Mt Albert Station remains to be seen.