The rural property market is the most liquid it has ever been, with Bayleys COO Duncan Ross saying more capital is chasing rural land than at any previous point.

He says Bayleys had its best rural year on record last year.

“We’re sharing in the celebration of what has been a fantastic rural economy,” he says.

The Fonterra capital release and the Mainland sale have together returned capital to farmer shareholders on a scale the market has not seen before.

“If you take the average rural real estate market over the last four years, it’s $3.5 billion.

“So with the $3.2 billion released to 8,000 shareholder farmers, they could effectively pick up all of the transactions that occurred last year.”

That capital is showing up most sharply in tier-one dairy country. Canterbury and Southland have seen prices step up $15,000 to $20,000 per hectare on the best land, with competition running deep at auction.

“We’ve got properties going to auction selling at sort of 24, $25 million with three underbidders.

“The winning bids are family farming units – it’s big money.”

Price growth has not run through the entire market, however. Ross says transaction volumes in Waikato have increased, but values have not taken the same leap, and tier-two and tier-three land has not seen the same price pressure as the top end.

Canterbury is still seeing dairy conversions from arable land, with that activity flowing through to support blocks in those areas.

“I absolutely think the value’s gone up in those areas where there’s conversions.”

First farm purchases account for about two in six dairy settlements in June.

“There are genuine sharemilkers and the like stepping into their first farms.”

With some farmers holding capital they cannot immediately deploy into more rural land, Bayleys has launched its Bayleys Invest portfolio to direct farmer money towards commercial property.

“Your yields might be 6 to 8 or 10%, depending on where you’re invested,” says Ross.

“It’s a really good way of divesting off the farm, continuing in property and lifting those returns.”

He says Bayleys can manage those commercial portfolios on behalf of farmer clients, and off-farm investment also helps address succession by building wealth outside the core farming operation.

CountryWide CONNECT with Andy Thompson & Sarah Perriam-Lampp is our daily rural show livestreamed from 11am-1pm. Visit country-wide.co.nz on how to watch/listen or download the CountryWide CONNECT mobile app, available on Apple iOS and Android.