Real estate sector sees interest in farms

ANDREA FOX
Last updated 05:00 03/05/2011

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If New Zealand's richest man, Graeme Hart, can sell a big chunk of his record-sized dairy farms on offer in south Waikato, new life must be stirring in the moribund rural real estate market, industry watchers say.

Mr Hart, through his Rank Group-owned Carter Holt Harvey forestry company, has sold eight farms near Tokoroa out of 29 on offer. The farms have languished on the market since 2009 in the post-global financial crisis recession.

Rank also sold a non-dairying farm.

It is not known what price the farms fetched. They are between 230 hectares and 280ha.

The buyers are understood to be New Zealanders. South Waikato's Brethren community are understood to be among them.

That leaves 21 dairy farms still to find new owners in what was marketed as the biggest single offering of farming land in New Zealand. The asking price for the 29 farms last year was $224.5m.

It is understood that a syndicate of New Zealand and overseas business people interested last year in buying farms and building a milk processing plant at or near Tokoroa is still in talks with Rank.

Rank converted 11,600ha of south Waikato forestry land after buying pulp and paper giant CHH in 2006 for $3.4 billion. About 8600ha became effective dairy farms.

The country's biggest rural real estate company, PGG Wrightson, said genuine inquiries had increased this year.

"It's not taking off but there has been more activity, more good, genuine inquiry and more sales – but it is off a low base," general manager Stuart Cooper said.

The type of sales had also changed this year, with a slight rise in sales of economically viable $2 million-plus farms.

Since the recession started, most sales activity had been in the under-$2m category, which was considered non-economic.

Latest figures from Trade Me support this.

Head of Trade Me Property Brendon Skipper said that out of a 22 per cent increase in dairy farm sale listings in the first quarter of this year, compared to the corresponding quarter last year, 16 per cent had an expected sale price of $2m or more.

Between January and March, dairy bucked the overall trend of declining listings for rural land. During the first quarter, dairy property listings fell just 3 per cent against an overall rural property listings drop of 16 per cent, from 2010's final quarter.

There had been a noticeable pick up in dairy farm buyer interest since the market exit of bankrupted Chinese businesswoman May Wang and Natural Dairy of Hong Kong, the unsuccessful bidder for the Crafar farm estate, a large-scale vendor said.

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Mr Cooper said potential buyers were from New Zealand and overseas.

"We've got people now buying who are cashed up.

"They sold in the heydays [before 2008], and sat on their money. And there are buyers who would have put their money into finance companies if there had still been any around.

"We see it as the crank is slowly starting to grind away from being almost at a standstill."

Dairy farm sales totalled about $1 billion last year, a sharp contrast to a "normal" year when sales were about $4b, Mr Cooper said. "In the run up to the crash [2008], annual sales were $7.2b."

Mr Cooper said 184 economic-sized dairy farms sold last year, compared to 400 in 2008.

Real Estate Institute (Reinz) rural spokesman Peter McDonald said a strong dairy payout forecast and robust sheep and beef returns had injected "a bit of confidence". "But it hasn't filtered through into sales, as we would have anticipated.

"Next year, though, could be entirely different. A lot of farmers have taken their properties off the market in anticipation of a stronger market next year."

Reinz said 190 farms sold in the March quarter, from 204 in the same 2010 period.

- BusinessDay.co.nz

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