Excellent spring weather in most regions, contradicting earlier forecasts, should take the majority of farmers through the rest of the year without expending their supplementary feed.
As the quantity of farms offered for sale has risen in recent months a reasonable level of market activity might be expected. However, while prospects for a productive season are favourable, increased production costs and interest rates are further eroding already reduced commodity returns. For sheep and beef farmers in particular, profitability margins are squeezed leaving optimism levels insufficient to encourage many to purchase rural property. Real Estate Institute statistics for the sector indicate a year on year drop in sales. Improving returns for dairy may hold the key for a broader recovery.
Demand for sheep and beef farms with size and scale offering the potential to add to existing properties is steady. When a neighbour or strong local farmer can see the benefits of consolidation, interest is forthcoming. If the block can be split between two or more neighbours, all the better. Buyers are seeking affordable parcels that they can fund from a sheep and beef income: only when a budget stacks up will a transaction proceed.
Where purchase by a near neighbour is not an option though, vendors require patience.
Healthier levels of confidence among buyers should return in a few months. As always, that is conditional, hence the need for patience. If the good growing season continues, product prices improve, and the new government beds in, a property market upturn is likely. Interest rates are holding back buyers, particularly for sheep and beef properties. So long as financial institutions remain willing and flexible with their lending criteria, the rural property market should start to gather momentum.
Within specific regions, while activity is generally subdued, some highlights are noteworthy.
Sales of Northland farms for conversion to forestry have reduced, though may be among those that re-commence in the coming months, depending on how the new government formulates relevant policy. Notable recent sales include a spectacular Northland coastal property, a grand portion of elevated coastline suitable for lifestyle development, looking out to the Poor Knights Islands north of Whananaki, which sold positively in late October.
Waikato and the Bay of Plenty are becoming buyers’ markets, with several desirable farms and lifestyle properties available.
In Hawke’s Bay, Pukekura, a large, classic sheep and beef property on 596 hectares of mainly rolling and medium hill country bordering the Tukituki River between Havelock North and Waipukurau, trading and finishing steers and lambs is gaining attention, while the December transaction of a 553 hectare property north west of Dannevirke was one of the few to sell recently for conversion to forestry.
In Marlborough, increased plantings and two large harvests in succession are threatening an oversupply of grapes that might test the level of demand for our wine overseas. As a consequence, caution prevails in the market for viticulture property.
While some notable North Canterbury farms have sold recently, including a 315 hectare Oxford grazing property, and a 128 hectare Waiau finishing farm, several others listed for spring sale remain unsold. Scheduled to come to the market in February, a 600 hectare aesthetically outstanding multi-purpose Okuku property with an attractive homestead and modern infrastructure, should generate attention. In the residential and lifestyle markets, Amberley is a current hotspot.
In Mid- and South-Canterbury and North Otago, dairy properties are back in focus. In a limited buyer pool, demand is returning for properties under $8 million and with low-cost irrigation. Sales are in the pipeline, and although values have reduced, vendors are ready to accept where the market now sits. Elsewhere the region’s residential property market is becoming more active, particularly for first home buyers, though building inspection reports are under scrutiny for those seeking finance.
Attracting attention in Central Otago, freehold 13,177 hectare Northburn Station on the shores of Lake Dunstan, and Crown lease 11,400 hectare Matangi Station, both exceptionally located near Cromwell and Alexandra respectively, are two renowned properties, unique and well respected for their production of quality fine wool, both also offering proven opportunity for diversification. While interest in them is excellent, such properties seldom sell quickly.
In Southland interest in dairy property is on the upswing with sales transpiring. Smaller blocks with the relevant consents and previous dairy grazing history are selling consistently at values on par with last year. Lifestyle property in the region is also in demand, with Te Anau and Manapouri a particular focus of sales activity as new home buyers and others purchase sections, homes and lifestyle property.
Typically when a market is in hiatus, as it generally is for sheep and beef property, one or two crucial sales will initiate activity and spark renewed momentum, accelerating the cycle’s upward trajectory. Confidence generated by improving dairy returns may be the catalyst for this in February and March, possibly also flowing through to the sheep and beef sector.
Although anyone considering buying rural property can wait for that to happen, those who anticipate it or elect to take a more proactive approach may achieve greater satisfaction: we are in a buyers’ market, there is no time like the present, and the best time to buy is now.