For an extended period, the rural property market has been subdued. Going back more than three decades, I have never seen the market so inactive for so long. It has been tough. Some vendors have listed farms for sale then withdrawn them due to lack of motivated buyers.
However, along with every other market, this one goes in cycles, and you can be certain that eventually activity, demand and property transactions will start to re-emerge at a much higher rate.
What you can also bank on is that those green shoots will first spring up in the auction room.
Auctions provide an instant gauge of the rural property market, and the best measure we have of a farm’s true value.
When interest rates drop and on-farm profitability returns, the turnaround will follow. As soon as there are two people at an auction, cashed up and ready to go, it will happen. My prediction on timing is that this will occur in late October or early November. When it does, those previously withdrawn listings will come back onto the market, along with others.
Auction will be a key factor in this recovery.
While there is never a ‘wrong’ time to stage an auction, once the market swings back to the positive, auction will come back into its own as the best way to transact rural property, in which case those of us who conduct auctions must prepare for a busy time.
Selling a farm through auction is an efficient, dependable way to bring out the market’s best possible response. An auction creates a clear, transparent competition that encourages purchasers to reach a fair value and settle on an optimum price.
An auction demonstrates that the owner seriously intends to sell. Meanwhile a marketing campaign with an agreed auction date establishes a focus for anyone interested in buying, giving them a deadline to complete feasibility studies and arrange finance.
Auction is a common and centuries-old means of transaction throughout the rural economy, whether in livestock, wool or the standardbred sector. Selling land by auction is a logical extension of a process that farmers know well.
On the day, a farm auction is usually a milestone event in the community, featuring drama, as well as emotion for both vendor and purchaser. Even if they do not intend to buy, neighbours will likely attend. Bidders fight to resolve ownership, using the price they are prepared to pay as the weapon that will win them the farm.
For those selling, an auction’s major advantage is the degree of authority they maintain. While the buyer sets the price, the seller controls the process. If a bidder meets the reserve and the auctioneer’s hammer falls, the sale is unconditional. However, if no bid meets the reserve, the auction will likely have identified other options to progress a sale. At that point, while the two parties remain highly motivated, the auctioneer can bring them together and initiate negotiation, seeking to reach agreement between them on conditions that will enable a sale to proceed.
Due to the rural property market’s recent lacklustre nature, auction has fallen somewhat out of favour. An auction will be where our market’s upswing first becomes evident. Once that happens, for a period at least, the auction room will be the best place to be to understand how far and how fast that recovery will occur.
I look forward to seeing you there.
Sloane Morpeth began his career working for Wright Stephenson, one of the companies that subsequently merged to become PGG Wrightson. Sloane made his mark auctioning livestock in Masterton, before moving into real estate marketing rural property. He has held the role of PGG Wrightson Real Estate specialist North Island auctioneer since 2014.
SLOANE MORPETH
North Island Auctioneer
027 489 4667
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