Institutional investors don’t tend to join the flurry of buyers when the property market is booming, says Tim Gallagher, a PGG Wrightson Real Estate sales consultant in Te Puke, specialising in dairy and horticulture.
Which is why now is the perfect time for them to be making their move to purchase properties in the dairy and horticulture sector - and why Tim is seeing plenty of activity after what he describes has been a few ‘docile’ years.
Pictured: Tim Gallagher, rural and lifestyle sales consultant in Te Puke.
“There are typically two types of investors in agriculture. Institutional investors - who are organisations like universities, pension funds, Iwi etc. They are large scale and typically sit out of ‘hot markets’.
“Then there are the ‘mum and dad’ investors, who are on more of a small scale. They have strong balance sheets and are keen to spend some of that money to grow their business. The banks want to lend money to them and are usually actively pushing options in front of those people.
Pictured: A 113ha dairy farm on one title in Papamoa.
“We’ve had two - three years of a market that has been in ‘hibernation’ and then in the last three months we’ve seen record prices - particularly in dairy - in some areas of the country due to pent up demand.”
As Tim explains, a return-driven market is what institutional investors are looking for, they simply aren’t in the business of paying ‘too much’ or one-upping other potential buyers. So it is about looking at the right investment opportunities that will provide a good return on investment (ROI). And for most agribusiness opportunities, interest rates don’t actually impact on sales as much as they do for residential property.
“Sure, it has an effect but it is certainly not the main driver. It’s about returns and long term outlooks, which is really good for dairy now, with optimism up considerably in this sector.”
Pictured: Joe Blakiston, PGG Wrightson Real Estate sales manager in the Marlborough region.
Currently, government restrictions on overseas investors do mean that it’s difficult to get agribusiness purchases across the line in New Zealand (forestry somewhat excluded from those restrictions). And Joe Blakiston, PGG Wrightson Real Estate sales manager in the Marlborough region, says that while it’s possible, it can be a complex and expensive process.
“Basically, you can’t invest in New Zealand agriculture from overseas just because you’ve got the money, there are several stringent tests that the Overseas Investment Office rules require to be met before applications will even be considered.
“However, there are currently moves to make changes to the OIA (Overseas Investment Act), which are expected to be introduced this year. That should mean the pathway to ownership of land in New Zealand by foreign buyers will be more straightforward and it’s certainly positive for the rural land market - although it could be two years or so before we see any benefits,” says Joe.
But that’s not to say it can’t be done currently, with the viticulture industry comprising a large number of ownerships by overseas wine companies (up to 30% of the planted area at last survey.)
Pictured: An iconic 401.74ha Marlborough farming property, with a 50 to 70ha identified plantable area to interest progressive viticulture developers.
“Marlborough has always been an attractive region for overseas investors. Cloudy Bay Vineyards Ltd, one of our premium wineries and vineyards, is directly owned by Louis Vuitton Veuve Clicquot, and they have been actively securing additional strategic blocks over recent years,” notes Joe.
“Constellation Brands (Kim Crawford wines) and Treasury Wines (Selaks and Matua) are also overseas owned. It’s often an easier path for those companies who are already in the New Zealand market to expand their footprint.”
“And because they continually review their investment strategy looking for growth opportunities, the present downturn in the viticultural cycle means there may be some good purchase opportunities for companies looking to scale up their investments.”
What’s also interesting is that demand for rural and agricultural property isn’t necessarily driven by an uptick internationally for New Zealand produce. Tim says yes, it plays a part, but it's actually due to a myriad of factors.
“The recent increase in prices for dairy farms in Canterbury isn’t because of global appetite. It’s down to the domestic market and what they are after. Look at the sheep and beef industry - we’re known as one of the cleanest producers of meat in the world, but then those are the sectors which have been hit pretty hard the last couple of years.
“But now we’re seeing more optimism in the factories and across those agricultural industries - and things are definitely on the up.”
Pictured: A high producing, north facing 4.047ha kiwifruit orchard in Waihi.
Tim also credits productivity gains for the upturn, explaining that for example while the cost of growing fruit in the horticulture space is increasing, so is the average yield - growers are able to produce more than they were 10 years ago. And it’s the same in dairy, where the average cow is able to produce more milk.
“Every year we see improved efficiency gains, with new technologies and automations assisting with production. And data is a huge one. The more accurate information these business owners, growers and farmers have, the more informed decisions they can make.”
And Aiden Gent, General Manager for Rural at ASB Bank, agrees with this sentiment.
“When armed with additional data from environmental reporting, it becomes a lot easier to quantify the impact of how different types of land are used - giving a much better idea about the best use of that land.
”Aiden says that it’s about getting better at responding to changing conditions and looking at alternative land uses or altering the mix of what is being grown or farmed.
“Things change if you look at all the different parts of a farm and decide to operate all of them as efficiently as possible,” he explains.
“You then have greater flexibility in your system and that leads on to a few different revenue sources.”
All of this is good news for agribusiness investors - and rural property owners too - and with PGG Wrightson Real Estate’s General Manager, Peter Newbold, saying that 2025 is off to a promising start for the rural sector, it’s safe to say that there are a few exciting years ahead for the industry.
Thinking about your next move? We can help. Our knowledgeable team are your local experts, wherever you are, and wherever you want to go.
Related posts
Back to News & Publications
