Biggest trends

Strong dairy revenue growth expected

New Zealand’s milk production in 2024 declined compared to 2023 but remained strong. Fonterra’s record monthly payout in January 2025 signals strong market performance. Dairy export revenue is forecast to grow by 10% to $25.5 billion by June 2025, reversing the decline from the previous year.

Cost pressures and market liquidity challenges

While the farm gate milk price remains positive ($10/kgMS mid-point), high input costs continue to squeeze profit margins. Interest rates have peaked, but the high cost of debt is restricting capital circulation in the market. Well-capitalised operators continue to access debt, but overall investment activity is limited. LIC reported a decline in profit but maintains a strong balance sheet, while Synlait’s financial position requires further review. These financial constraints are expected to impact rural real estate transactions, with price sensitivity and access to capital becoming key factors in buyer decisions.

Sustainability and environmental compliance as market drivers

Environmental due diligence is now a standard expectation for buyers and lenders. Farms are under greater scrutiny for emissions, water use, and overall sustainability metrics. Regulatory developments, including potential changes in gene technology laws, could impact future farm management strategies. This shift is affecting rural property values, as farms that are already compliant with sustainability standards are commanding premium prices.

Outlook for the next 12 months

Selective buying and flight to quality

High stock volumes provide buyers with more options, making location and farm quality key considerations. The market continues to favour well-maintained, high-performing farms, with weaker properties facing price pressures. In the rural real estate sector, this is expected to result in increased competition for top-tier properties, while lower-quality farms may see prolonged sales periods or price adjustments.

Land use and structural shifts in dairy farming

Support land remains in high demand, with smaller dairy farms likely to be phased out in favour of larger, more efficient operations. The restricted ability to convert land to dairy farming is driving scarcity and reinforcing underlying land values. Industry consolidation is expected to continue, with strategic long-term investment driving transactions. For rural real estate, this means larger, well-equipped farms will continue to attract investor interest, while smaller properties may be repurposed or sold for alternative agricultural uses.

Export growth and global demand trends

Global dairy supply constraints are expected to support higher export prices. Demand remains strong from key markets such as China, the US, and Europe, providing confidence in New Zealand dairy exports. Potential shifts in global trade policies (tariffs) and sustainability regulations could introduce both risks and new opportunities.