With geopolitical and economic volatility at its most critical juncture in two decades, strategic advice and the use of data and insights will become crucial tools for landowners wanting to seize rural real estate opportunities.

The 2022 issue of Bayleys’ global partner Knight Frank’s Rural Report is a valuable resource when it comes to gaining a global view on wealth creation through New Zealand’s rural and lifestyle property sector including how investment evolves with trends, and the opportunities at play across the market.

The 12th annual edition of Knight Frank’s flagship annual report paints a dramatic picture of an extraordinary moment in economic history. Global easing of pandemic restrictions, combined with inflation and the increasing cost of servicing debt are creating opportunity and risk in equal measure. So too, is Russia’s war with Ukraine which has sent global commodity prices surging, and pushed food back to the top of the political agenda worldwide.

THE JUNCTURE

Behind political tensions, climate change concerns continue to push the agenda about appropriate land use in developed countries, including New Zealand. Is our rural real estate most efficiently used to house the nation, create energy, encourage biodiversity, sequester carbon, or create food?

The flexible nature of lifestyle land across Aotearoa is subject to a growing list of demands, from greater densification and zoning changes that will pave the way for housing, to initiatives that contribute to our goal of becoming carbon neutral by 2050.

Meeting these demands on a fixed amount of land requires innovative, multi-functional systems and new forms of government support that can fortify and encourage innovation for Kiwis, who operate in a country whose economy relies on agricultural output.

Increasingly buyers searching for rural and lifestyle properties are tapping into government messaging about sustainable agriculture and farming practices that can improve declining soil health to deliver environmental and community gain.

Observers say the past approach of subsidising every hectare of available land is a false economy and landowners of sites that are economically unproductive for reasons such as being too wet, too dry or difficult to access with modern machinery are holding out for technological advancements that can deliver real productivity improvements that are recognised by the government.

THE NEW WAVE

Knight Frank’s report identifies New Zealand’s experience of the pandemic push to lifestyle properties as a reactionary escape from health hazards in urban areas is not an isolated phenomenon.

It notes new buyers are enquiring across the global lifestyle market, creating a completely new segment that salespeople have not seen before.

Significant landholders who expand their presence, or purchasers looking to secure sites with a view to future development are being joined in increasing numbers by purchasers focused on securing their own slice of green paradise.

This has resulted in the creation of new vernacular, as the report tasks the buzzword ‘rewilding’ with as an apt way to describe the purchase of lifestyle property for environmental and lifestyle enhancement.

Bayleys’ dedicated lifestyle salespeople have been inundated with enquiries from this new buyer group seeking strategic advice about land use, covenants, development and the ongoing maintenance of their newly purchased land tracts.

Abroad, the report suggests an uptick in foreign investment could be heading our way, as more sophisticated investors look to ESG (Environmental, Social and Governance)-compliant assets such as rural properties to future-proof their portfolios.

There’s increasing interest from basic investors wanting to see demonstrable environmental and sustainability credentials, many of which see rural and lifestyle land ownership as one of the most significant ways to achieve these objectives.

With reopened borders, offshore investment will have a renewed presence as investors look to rebalance their portfolios, and global companies press ahead with business plans after the disruption of a global pandemic.

Investment into our rural sector, with a trickle-down effect on the lifestyle sales sector and the price of land, is likely to come from New Zealand mainstays in China, Hong Kong, Singapore and Australia.

THE WAY FORWARD

Just like a well-oiled machine, every property needs to operate from a solid financial foundation and risk management continues to be a priority for mortgage holders as the Official Cash Rate (OCR) increases and the Reserve Bank of New Zealand (RBNZ) battles to control inflation.

Risk management is different for everyone and while the global economy is experiencing volatility after a decade or so of true stability, buyers and sellers can still seize lifestyle opportunities.

As market fundamentals continue to shift with the property cycle, it becomes increasingly important for active participants to keep abreast of the latest insights and market analysis from businesses like Bayleys and Knight Frank - so they are better prepared to make informed decisions when opportunities arise.

Knight Frank’s Rural Report highlights the emergence of new outlets which are set to enhance the environment and serve local communities such as thoughtfully planned rural/lifestyle subdivisions.

While at their core, the new wave of buyers is focused on creating prosperous and more resilient, sustainable local economies, ultimately, they need to see that their asset is covering its costs – or better, making money through capital gain, lease arrangements for land use or the emerging field of carbon sequestration.

This conversation is at the heart of what landowners are trying to do globally and yields potential new income streams such as carbon credits and biodiversity offsets which while not the silver bullet future prosperity, can add another dimension to the conversation about the fundamental future of rural and lifestyle properties across the world.