The rural property market is boxing on with positivity – leveraging off New Zealand’s low interest rate environment and despite some uncertainty in global commodity markets. Bayleys national country manager, Simon Anderson looks at some of the forces at play.

Resilience and confidence are two words that New Zealand farmers know very well. And they are words that describe the current rural property market, too.

Latest Real Estate Institute of New Zealand (REINZ) data shows total volumes and values of farms sold in 2015 were slightly lower than those recorded for 2014 but the rural property sector – across the board – is cyclical, just as the residential market is.

We are coming off a very strong market and just how long the momentum can be maintained is not clear. Historically we have found that when fundamentals get tight in the farming and commodity sector, farmers make provisions to ride the troughs out.

Reduced returns at the farm gate, however, are requiring farmers to focus on things that are within their control. The aim is profitability through controlling both their fixed and financing costs in order to manage or improve their credit rating.

"New Zealand rural property is still held in very high esteem and remains keenly sought-after - regardless of external market forces."

Bayleys national country manager, Simon Anderson

CHALLENGES

Let’s be realistic – the next 18-24 months will be a critical time in the New Zealand dairy industry. Viability – rather than productivity – will be the dairy farmer’s key focus.

There are many positive signs in the sheep and beef industry even with the current global uncertainty. Change management within the meat industry is required and change will bring further unknowns but this is required for the companies to improve their own financial position plus their performance to suppliers.

Pastoral farming in New Zealand has always had its ups and downs. The industry will grow with resilience, and find its own level once again.

For some farm owners, the impact of world commodity markets will not be sustainable and decisions around property ownership will be made. Everyone involved in the industry must stay positive and farmers should be willing to discuss issues with advisers and trusted experts.

Given the strong local, ex-pat’, offshore and syndication enquiry Bayleys is fielding, New Zealand rural property is still held in very high esteem and remains keenly sought after – regardless of external market forces.

VITICULTURE SECTOR

New Zealand’s wine exports for 2015 reached record levels with a value of $1.54 billion. There is clear evidence that the big players in the wine industry are getting bigger – they’re acquiring more land, controlling their costs more and becoming more self-sufficient relying less on buying in contract grapes to meet their production targets. The wine industry is underpinning a number of our regional economies.

Well-located and productive smaller independent vineyards are still selling well across the Bayleys network as are existing larger vineyards and bare pastoral land suitable for viticulture. Marlborough, in particular, is thriving on the back of demand for its wine internationally with around 80 percent of this country’s wine coming out of that region.

HORTICULTURE

Horticulture is New Zealand’s fourth largest export earner – with exports valued at more than $2.5 billion annually. It is great to see the horticultural sector performing well from a property perspective as well.

In Hawke’s Bay for example, we are noting very strong demand for existing apple orchards and for land suitable for conversion to apple growing.

In some instances we are seeing former vineyard land being converted to capitalise on demand for quality pip-fruit by both domestic and export markets. Avocado, citrus, kiwifruit and other horticultural cropping properties around the country are also attracting good enquiry and interest from buyers.

IT'S THE LIFESTYLE THEY'RE AFTER

The lifestyle property market was the star performer of the rural sector last year with REINZ figures showing that more than $6 billion worth of lifestyle property changed hands.

In the nine months to December 2015, the volume of lifestyle sales was up 34 percent and sale prices were up 49 percent on the same period in 2014. This value rise was largely driven by particularly strong activity in the Auckland region, although provincial New Zealand waved its flag positively, too.

Early indications are that 2016 will be just as active in the lifestyle sector with many heartening fundamentals underpinning the market. Low fuel prices, low interest rates and the growing desire for city-based folk to have less stress and more family time enhances the lifestyle property equation.

Keeping up with the demand will be a challenge and we are already noting a supply-demand imbalance in many parts of the country as buyers seek the lifestyle dream.

Our autumn edition of Country features a range of compelling rural property opportunities covering the length and breadth of New Zealand. Bayleys’ specialist rural sales team is primed and ready to assist you on the path to farm or lifestyle block ownership so we look forward to hearing from you.