This month, the McDonald Real Estate rural team contacted Shaun Poole from Hutchins and Dick Valuation & Consultancy. This article dives into his expert perspective on the rural dairy farm and dairy support market in 2022 and 2023.
Shaun Poole from Hutchins and Dick
Hi everyone, my name is Shaun Poole from Hutchins & Dick Property Valuation & Consultancy. We are located in New Plymouth and service all property types throughout the Taranaki region. I work mainly in the rural sector so here is our perspective on the rural dairy farm and dairy support market over the past 12 months.
Rural Market Overview
At the beginning of the 2021/22 season, Fonterra announced a record payout of $9.30 per kilogram of milk solids (kgMS).
Despite this promising start, activity levels have since decreased. In the 2022/23 season, the midpoint final milk price declined to $8.30 per kgMS. Declining further still, the current Fonterra forecast midpoint for the 2023/2024 season is $8.00 per kgMS.
Despite the milk price forecast being stable and relatively high, the market for selling dairy land hasn’t thrived in the 2022/23 season. Although a few transactions have gone through at high values, there are still many unsold farms with minimal interest from buyers.
The rural market is in a subdued state while the industry absorbs rising financing and operating costs. The need for consolidation to address future compliance issues and potential expenses has caused prospective buyers to act with caution. This trend of buyer hesitation is due to the following factors:
- Increasing interest rates
- Higher production costs
- Unknown future policies
- Environmental decisions
On a positive note, the Taranaki region is in an excellent position to meet future compliance issues. With our favourable soil types, climate, ecosystem, and relatively low cost of production, farmers can be confident that meeting requirements will be fairly straightforward compared to other regions across the country.
How a property valuation can help you
This process involves a property valuer conducting a thorough inspection and preparing a detailed report that includes market information and an objective opinion. Their assessment can be trusted as they take responsibility for the value determined and provide transparent information.
Property valuations are helpful not only when buying or selling a property but also when making other critical decisions relating to your rural property.
Buying or selling rural property
A market valuation helps ascertain the real value of the property in the current market, helping a prospective buyer to know if a price is appropriate. Likewise, the valuation lets the vendor know a realistic sale price to list or sell the property in the current market.
Valuations are vital for properties sold on the open market and privately. Most private sales are either succession transactions, related party transactions, or situations where properties have a “first right of refusal” clause before going on the open market. Additionally, valuations are needed under the Property Relationships Act.
Mortgage security
If a buyer plans to obtain a loan, the lending institution typically relies on a property valuation to assess the market value. This needs to be an unbiased and expert assessment that the lender can trust.
Insurance purposes
A professional market valuation will also streamline the insurance process. While insurance valuations are not the same as a market valuations, there are similarities. An accurate insurance valuation ensures the insurance amount for an asset is reasonable, protecting the property owner from being underinsured.
Rental assessment
A rental assessment assesses the market rental rate for the property, taking the location and other specific factors into account. This ensures the lessor is renting at a suitable rate and the lessee is not renting at a higher than market rate.
Valuations for tax purposes
In some cases, a property valuation can help with tax processing. Examples include when a subdivision occurs or when the Bright Line Tax is triggered. Your accountant will advise whether you need a valuation.
Financial reporting
An accurate valuation is vital for a board to establish the performance and operation of a business or farm.
The key advantage of a property valuation from a qualified expert is that it is fully transparent and objective. They will provide you with a detailed inspection and report, detailing their professional opinion on the transfer or partial settlement of land.
If you require a valuation or wish to discuss anything property-related, Hutchins and Dick can help. You can contact them here for tailored advice and valuations for all property types.
