Rural Property Pulse_Winter 2016 edition

Rural Property Pulse Issue 23 | Winter 2016

Contents Inside > HEARTBEAT – Manuka honey creates new option for previously unproductive land > Livestock markets suggest confidence is increasing > Dairy property perception gap waiting to be bridged > REGIONAL UPDATE > Promising prospects for wool growers > Insurance needs demand careful scrutiny during policy renewal process

Back > A closer look at sectors

Helping grow the country

Properties to graze sheep and beef are in short supply in many regions. When such farms do come on the market, they have tended to be readily purchased by neighbours or other local farmers.

Various sectors thriving in overall steady rural property market Horticulture, beef, viticulture and cropping all experienced good to excellent growing seasons, capitalising on sustained export success and favourable farm gate returns.

Consequently, land associated with each has sold at firm or record levels.

In the Bay of Plenty, Hawke’s Bay and Marlborough, the horticulture and viticulture property markets are as strong as they have been for many years. Vineyards and orchards, whether for apples or kiwifruit, are selling at significantly elevated levels. Many growers are keen to consolidate and investors are looking to participate in sectors that are showing impressive returns. Demand for these properties therefore outweighs supply by a sizeable margin and prices have responded accordingly.

Although there is no saying what the future holds, current trends suggest these gains are sustainable for those particular land uses.

Lifestyle property is also in heavy demand, with a high volume of sales and record values throughout many regions, particularly those within reach of Auckland, where the booming residential property market is creating farreaching consequences.

In contrast, dairy has undergone welldocumented challenges over the past year or so. Dairy farmers are taking considered and logical steps to adapt to their lower pay-out, reducing inputs and, in particular, de-stocking.

While their sector is adjusting, these farmers have been less inclined to buy or sell land.

Although buyers and sellers are out there, neither group is highly motivated. At the top end, dairy property values are consistent with where they have been though, for less desirable properties, reduced prices are being offered and accepted.

Whatever the pay-out does, the dairy property market should resume activity at a higher volume of sales again over the next few months, leading other sectors with it.

Where values sit when that happens will depend largely on whether or not the pay-out has started to rise again.

Whether you are thinking about buying or selling dairy property as that market evolves or inclined to make a move in one of the other sectors, where motivation and direction are clearer cut, you will benefit from independent expert intelligence to guide you.

Alongside our wider company colleagues, whose knowledge of New Zealand agriculture is unsurpassed, PGG Wrightson Real Estate Limited can provide that guidance.

We are near at hand and primed to help.

Peter Newbold General Manager PGG Wrightson Real Estate Limited

Rural Property Pulse is published quarterly by PGG Wrightson Real Estate Ltd, PO Box 292, Christchurch 8140.

The information provided in this publication is intended to provide general information only. This information is not intended to constitute expert or professional advice and should not be relied upon as such. Specialist specific advice should be sought for your particular circumstances.

Licensed REAA 2008.

HEARTBEAT – Manuka honey creates new option for previously unproductive land A growing new use for land that otherwise offers scant productivity is elevating rural property values in some parts of the country.

Manuka honey is catching the eye of many in the rural sector, particularly in the North Island.

Beekeeping is evolving into a billion-dollar export business, and those involved are prepared to invest to secure their access to land and therefore their supply of manuka nectar.

With corporate finance interests playing a role, previously low-value land has recently changed hands at considerably elevated prices.

As a raw product, manuka honey can be processed in many different ways for sale in multiple consumer categories, the chief of which are food and beverage, cosmetics, nutraceuticals/natural health products and medical. In many instances, the product has potential for significant further development, giving it huge scope for increased added value.

New Zealand and Australia are the only places where manuka grows naturally. In much of the country, manuka growth is straightforward, with relatively few pest and disease issues.

In 2014/15, honey was a $242 million export business. Over the last 10 years, New Zealand’s honey export earnings have increased at a compound rate of 23% per annum. With manuka honey accounting for most of that growth, some tip the sector to become the country’s next billion-dollar export earner.

While other major honey exporters earn US$3 to $9 per kilogram for their product, New Zealand’s average export price is $27 per kilogram. Based on the 2015 price schedule,

manuka honey sells for approximately $33 per kilogram. This is largely due to the scientifically proven anti-bacterial and anti-inflammatory properties that differentiate manuka from other types of honey. Manuka honey’s use in medical products probably offers the best potential returns. Off-the-shelf medical products, such as creams and gels, are used in hospitals to heal wounds and skin infections when standard treatments are ineffective, such as against antibiotic-resistant bacteria.

While some indications suggest that medicalgrade manuka honey has, or could have, a market value up to NZ$1,000 per kilogram, this type of opportunity needs considerable additional development and the potential yield and size of the medical-grade honey market is unclear.

What this means to landowners is that a manuka plantation could deliver a return on marginal capital employed ranging from 10 to 15 per cent, potentially more if readily available grants to improve erodible land are used to reduce the cost of establishing production.

Economic rationale and arrangements between beekeepers and landowners have developed rapidly to secure land suited to manuka honey production, which is generally country with previously minimal productive or financial value. Values have more than doubled in some cases. Lower and central North Island land in native bush and punga, which might otherwise sell for about $1,200 per hectare, has changed hands for as much as $3,000 per hectare where access to manuka can be established.

Manuka Farming New Zealand is the commercial arm of Manuka Research Partnership Ltd, which was formed in 2011, comprising primary sector, apiary and other interests, to undertake research into the business case for manuka plantation on marginal pastoral land. It estimates that a block of 20 hectares is sufficient to economically grow manuka; that the cost to establish a manuka plantation is between $2,000 and $2,500 per hectare, which includes plants, establishment, planting, weed control and pest control; that a planting density of 1,100 stems per hectare is recommended; and that manuka’s production lifespan is 25 years, with the first crop after three years and floral maturity in six years.

Apiarists and investors interested in manuka honey’s potential are moving to protect their future supply. In simple terms, a stand of manuka will accommodate one hive per hectare, enabling annual production ranging from 20 to 40 kilograms of honey per hectare.

Whereas, traditionally, beekeepers have had a loose arrangement with landowners, more formal leases are now the minimum, ranging to ownership and management of the land with a specific bee-farming focus. Use of land to primarily produce honey involves development to maximise effectiveness, including selecting the most appropriate manuka cultivars and establishing additional species to sustain bees for the 10 or so months of the year that manuka is not in flower.

A 340 hectare Upper Whanganui property was purchased recently by beekeeping interests to establish honey production, changing hands for around $4 million, while a 1,600 hectare Raetihi property sold similarly for $6 million.

A 712 hectare central North Island property marketed by PGG Wrightson Real Estate in the autumn had a rateable valuation of $890,000.

Running 900 sheep and 50 cattle, more than half of the farm is in bush, cutover bush or manuka. A few years ago, its major selling feature related to its suitability for hunting.

However, with potential to markedly increase the 200 hives the property already hosts, when for sale by tender more than 20 different parties inspected it, all with an interest in honey. Its likely sale price will be around $3 million.

With the manuka honey sector still in an early phase of development, there are opportunities to improve productivity in numerous respects, at all points of the supply chain. These range from management of land use, hives, fertiliser, planting, pests and diseases; to standardisation of rating systems and labelling of manuka honey to ensure its authenticity in export markets, plus the development of additional markets for products derived from it, and further development of those products.

Manuka honey looks set for a bright future, and an important role in increasing the value of rural land previously regarded as unproductive.

coast of the South Island went through a dry autumn, and drought conditions again threatened.

Livestock markets suggest confidence is increasing Climatic conditions have proven a major factor in the autumn livestock market.

In the North Island, warmer soil temperatures and high humidity in particular areas, coupled with warm northerly rains, combined to bring about record spore counts and one of the worst seasons in memory for facial eczema.

On a positive note, the mild North Island autumn with regular rain has been positive for pasture growth and farms approach winter in good stead.

After good rain in January to break what was a looming drought, much of the east

Judging by sales of livestock through the autumn, dairy farmers are gradually regaining confidence in the face of the reduced payout. In the South Island, the market for dairy livestock shifted from over-supply to under-supply in April and early May. Heavy demand for in-calf heifers, selling between $750 and $1,150; and herds, priced between $1,000 and $1,500 per cow, resulted in good stock being hard to find.

As demand for beef remains strong, farmers involved in dairy support have a viable alternative option, particularly as many dairy farmers are electing to keep their cows on the home farm for the winter rather than paying for off-farm grazing. Dairy-beef cross bull calves also presented as a smart option.

Likewise, because the price of beef has held strong, in the North Island, an average cull cow that might have previously gone to the works for $500 instead held at $700 to $800 through the autumn, largely based on the strong beef schedule this year. Farmers will be anxious to see those values holding up through the winter.

With confidence in the beef market, calf and weaner sales have risen, with prices ahead of last year by between $80 and $200 per animal. Steer calves and weaners were selling in both the North and South Island for between $3.50 and $3.60 per kilogram liveweight, with lighter weight steers at $4 per kilogram, while heifers were averaging $3.20 to $3.30 per kilogram.

While there is a perceived shortage of beef animals, the apparent reduction of the national beef herd may reverse while the beef schedule remains so strong, particularly relative to dairy.

Options for sheepmeat are less encouraging.

Liveweight store lamb prices through the autumn were between $2.30 and $2.40 per kilogram, offering traders and breeders limited opportunities. Rumours that Chinese demand for lamb is set to resurge remained unsubstantiated as autumn progressed.

PGG Wrightson’s ‘Go-Beef,’ ‘Go-Lamb’ and ‘Defer a Bull’ finance products provide farmers with the opportunity to fund the cost of stock for an extended period, with no cash outlay. Available through the Agonline website, they offer the freedom to subsequently sell at either store or prime.

They proved popular through the autumn, and look set to be widely used in the coming season.

Those farmers who take advantage of these products, and who effectively manage their costs and feed through what looks set to be a challenging winter in some regions, will be better positioned heading into spring.

This report was prepared in consultation with PGG Wrightson’s livestock team.

Dairy property perception gap waiting to be bridged While the dairy sector is adjusting to the marked fall in returns, dairy farmers are generally less anxious to buy or sell land than they have been in the past few years.

In the Real Estate Institute’s most recent nationwide statistics, farm sales dropped by 16.1% for the three months ended April 2016 compared to 2015, with 22% fewer dairy farms changing hands.

Neither buyers nor sellers of dairy land are especially motivated and a gap exists between them. Sellers believe returns have reached their low point and will start to rise again imminently. They are therefore holding out for values that prevailed in recent years.

A perception gap of between 10% and 15% has emerged, as indicated by the Real Estate Institute’s figures, which show the median value of dairy farm sales fell by 13.6% in the year to April 2016.

Although values for the most coveted dairy farms have not altered, location, size, quality, standard of infrastructure and proximity to metropolitan areas have a big impact on the perceived worth of a property. Those in the less desirable category have been discounted by 20% to 30% recently, on the back of limited supply. These values are based on the milk payout rate, along with future forecasts for what dairy returns will do.

Whatever the payout does, the dairy property market should resume activity at a higher level again over the next few months.

Whether buyers run out of patience or sellers decide they are ready to act, the perception gap associated with farm values is likely to close, and the backlog of listings and sales that would otherwise have occurred should start to clear.

How many dairy properties will be offered for spring sale is unknown at present. Although some suggest the number will be relatively high, creating an over-supply and further downward pressure on pricing, the reality is likely to be less dramatic, with only relatively moderate increase in listings. This would maintain the fairly even balance between supply and demand that has prevailed for the past few months. At the other end of the spectrum, if the payout starts to rise before the traditional spring selling season, those otherwise inclined to sell may be persuaded to continue farming instead.

Regional Update Northland

Listings were insufficient to meet strong demand for Northland rural property during the autumn.

Despite the well-documented cashflow issues facing dairy farmers, the sector’s appeal has not diminished in the region, with good interest in smaller dairy farms and a number of sales, including instances of multiple offers. Values for Northland dairy properties have not changed in the past 12 months, ranging from $12,000 per hectare so present first-time owners with excellent opportunities. Interest in sheep and beef properties is also steady, with recent sales at values between $5,500 and $15,000 per hectare.

A 279 hectare Kaipara Harbour sheep and beef finishing farm, farmed for over three decades by its previous owners, and acclaimed locally as a trophy property, generated strong interest from the market, both within and outside the region.

Waikato

While Waikato’s lifestyle and residential property sectors are buoyant, the rural market is subdued.

In the first four months of 2016, overall, 47 farms in the region sold compared with 99 for the same period in 2015, while 21 dairy farms sold this year, down from 39 last year. Meanwhile, prices remain steady as the average Waikato dairy farm value for sales from January to April 2016 was similar to the same period last year.

Virtually all well-priced dairy farm sales appear to be to neighbours. Supply and demand for farms seems evenly balanced. These trends should continue through the next few months in keeping with the normal winter slow-down and assuming little will change in the dairy outlook. Low commodity prices, in particular for dairy products and lambs, and low interest rates are the prevailing influences on Waikato’s rural property market.

Bay of Plenty

With kiwifruit orchards achieving ever more remarkable values, the Bay of Plenty rural property market was vibrant during the autumn.

A limited number of premium-quality gold kiwifruit properties have now commanded more than $700,000 per canopy hectare, while $650,000 sales are occurring regularly.

Outside the horticulture sector, one of the most significant local farm transactions for the past decade was a 484 hectare Waihi property, with a dairy platform, beef grazing and a farm quarry, which changed hands in April after strong market interest at the upper end of the district’s value expectations. Similar to other regions, despite reasonable interest, buyers and sellers of dairy farms are taking time to reach agreement on price. This may change in the spring, depending on what happens with dairy pay out projections in the meantime. Sales in the region’s highly sought-after lifestyle property sector were also exceptional during the autumn.

Hawke’s Bay

Dry conditions and a lack of farms for sale hampered Hawke’s Bay’s autumn rural property market. As winter is traditionally slow, this is likely to continue. With more buyers than sellers active, low interest rates and a favourable foreign exchange regime, farms that are offered will generally change hands satisfactorily.

However, retrenchment in the dairy sector, with fewer farmers looking for off-farm grazing heading into winter, has impeded the market to a degree. During the autumn, farms capable of running 2000 to 3000 stock units sold between $5500 and $7500 per hectare, while properties with 4500 stock unit capacity commanded $8000 to $10,000 per hectare.

Notable Hawke’s Bay listings include three farms running between 4,500 and 10,000 stock units though, otherwise, a shortage of attractive rural properties will probably prevail in the region through the winter.

Wairarapa and Manawatu

While little movement occurred in the dairy sector, as buyers and sellers take their time to agree on property values, Wairarapa and Manawatu fattening and hill country farms attracted more positive interest during the autumn. Encouraged by good returns for beef, farmers looking at these properties are well resourced and willing to purchase, within particular specifications. Generally, they aim to add to their farm, or take a second farm and do not intend to sell in order to buy. Most activity is therefore at a local level. As usual, through winter, the market is likely to remain relatively light, though anyone who lists a sheep and beef property in the region stands a good chance of achieving a positive outcome. Prospects for those offering dairy property for sale are less easy to predict, though well-presented farms in sought-after locations should attract purchasers.

Regional Update Nelson and Marlborough

Marlborough’s rural property market is dominated by viticulture, which remains positive post-harvest and should see activity through the winter with vineyard values around $180,000 to $200,000 per hectare. In the wider market, like most of the rest of the east coast, Marlborough was dry approaching winter. However, a number of the region’s sheep and beef farms sold valued at around $1,100 per stock unit. While Nelson’s lifestyle property market is vibrant, and the region is the focus of purchaser enquiry from around the world, a lack of new listings has hindered satisfaction of this demand.

Uncertainty over dairy prices and continued low returns for sheep farmers are inhibiting Nelson farmers from committing to the property market. Instead, many are focusing on trimming their budgets and realigning management practices to negotiate the winter in anticipation of a stronger new season.

Canterbury

Like much of the rest of the country, Canterbury farmers faced challenging climatic and economic conditions during the autumn. As a consequence, the market for dairy properties was quiet. More interest was shown in the drystock sector, particularly in North Canterbury.

One 247 hectare Hawarden farm sold for subdivision between neighbours in March for $15,700 per hectare. A 134 hectare Hawarden property also sold in May with multiple offers and, after considerable interest, purchased by a local farmer for $12,000 per hectare. While the region’s rural property sector is likely to remain in low gear through the winter, several property owners are preparing to bring both dry-stock and dairy farms to the market in the spring.

Although not many properties are currently coming to the market, those that do are well received and buyers are still looking for good dairy units.

West Coast

As in other regions, West Coast dairy farmers have focused on paring back their businesses to negotiate through the present period of reduced cashflow. That has resulted in little emphasis on buying or selling farms. Some interest in run-off properties, including limited sales, did occur in the autumn. Purchasers are motivated by the investment opportunity of leasing these farms to others. Difficult financial circumstances have been mitigated somewhat by excellent growing conditions in the region, resulting in outstanding production, despite the de-stocking that has gone on. Pending projected dairy returns over the next few months, more farms could be listed in the spring. First-time farm owners often find properties to fit their budget on the West Coast, a factor that might become more apparent in the coming months.

Mid and South Canterbury

Mid and South Canterbury’s autumn rural property market was muted, with a marked gap between buyers’ and sellers’ perceptions around property values. Those who would otherwise act are waiting to evaluate what is happening in the dairy industry before they commit. Although demand has exceeded the supply of good properties in the region recently, the situation is becoming better balanced as vendors become increasingly concerned that the values they aspire to may not be realistic if they wait too long. More listings are likely to be forthcoming leading up to the spring. An exception to the rest of the region, prime Mid Canterbury arable country is always in demand. Sales and new listings of a number of these properties were a welcome feature of the autumn market, with sales values firm between $47,000 and $50,000 per hectare.

Otago

While autumn in North and East Otago was dry, South Otago was moist and green. Rural property activity followed, with South Otago sales prominent. A 6,000 stock unit Circle Hill, farm in Milton and a 7,000 stock unit Kuriwao Gorge at Clinton property, along with a further four farms between 2,000 and 3,000 stock units, all sold. Prices held fully firm. Although interest in sheep and beef properties was strong, quality listings were lacking, particularly in stronger farming districts. While demand for the region’s dairy farms is less encouraging, a rumoured price correction has yet to occur. Whether that is due to a lack of sales or stronger underlying confidence than suspected is difficult to attribute. Through winter and into the spring, how Otago’s rural property market performs will depend heavily on commodity prices and farmers’ earning capacity.

Southland

After a slow March and April, when the volume of farm sales dropped by 60 per cent compared to 2015 levels, Southland’s property market picked up in May ,as farmers became more decisive in preparation for the new season and some sellers softened their attitude on price.

A highlight of autumn sales was a 390 hectare dairy farm at Dacre which sold in February for approximately $37,000 per hectare. Better quality dairy farms are selling at values around 10% less than last year. Properties with less desirable characteristics are changing hands at slightly larger discounts, though the small number of transactions makes comparative values difficult to gauge. Sheep and beef property sales are steady, generally to buyers within the local district. Aside from their cashflow challenges, good autumn growth means Southland farmers are happy with production levels.

Promising prospects for wool growers Returns for strong wool have improved in recent months, with greasy crossbred types doubling in price over the past two years. Lambswool, in particular, is achieving returns higher than for some time. Prices for mid micron and fine wools have also risen.

Wool is becoming more of a niche product, moving it away from its traditional commodity status and therefore increasing its value. As the range of products utilising wool has developed and diversified, and while sheep numbers are still decreasing due to land use change, growers have increased opportunities to contract the supply of their wool, rather than relying on the vagaries of selling at auction.

Products developed using wool as a component are diverse. For strong wool, the range now includes interiors, smart technology, textiles, insulation, seating materials, carpets, blankets and running gear. Meanwhile, mid micron wools are coming into greater demand for knitwear and blankets. Fashion garments are using more fine wool, which is also in demand for developments in active-wear, ski and cycle gear, where merino wool is increasingly used as a base material.

These innovations derive from various different countries, not just China or wider Asia, as initiatives are also in development in the United Kingdom and Europe.

While this opens up some exciting opportunities for wool growers, it also places the quality and performance of their product under greater scrutiny. New Zealand wool

growers have an advantage in this respect.

Processors and product innovators are attracted to New Zealand wool because, compared to most other wool exporting countries, it is grown on healthy stock, with good genetics, living in a temperate climate, on clean pastures and shorn consistently to an even length. This gives New Zealand wool advantages that other wools cannot match including absence of vegetable matter, suitability to take dye and superior strength to spin well.

Prospects for New Zealand wool growers are therefore more favourable than they have been for a number of years and returns should continue to climb. A clean worldwide supply pipeline, with no current build-up of stock to hold prices back, is another positive factor.

As long as farmers look after their ewes, particularly in those parts of the country suffering dry conditions pre-winter, and maintain the quality of the wool they produce by taking care of their flock’s nutritional requirements through the winter months, they will be well placed to take advantage of these beneficial market conditions.

Insurance needs demand careful scrutiny during policy renewal process Insurance needs demand careful scrutiny during policy renewal process. Over the next few weeks many dairy farmers will renew their insurance. During this process, a number of different factors need to be kept in mind.

New health and safety legislation was enacted in April this year. Since then, if an incident were to occur and the farmer held liable, the financial impact could be catastrophic. Risks to safeguard against include staff using machinery, vehicles and agricultural chemicals, and the challenges of working safely around animals. Specifically guarding against them via an insurance policy has become even more important under the new legislation.

Wandering stock is a common problem that can present issues should the stock be hit by a motorist. Including the right liability cover in an insurance programme is vital. Working alongside an insurance expert is the most effective way to minimise any possible risk.

As the pay out has dipped, most farmers have looked carefully at their budgets, seeking to minimise inputs while the sector is working through this challenging phase. In this exercise, the critical issue has

been to leave the business in a state where it can be quickly and easily scaled up again when the pay out starts to rise. Insurance is the same as any other input. While reducing insurance spend during a tough economic period may save a few dollars, if a major event were to occur and cashflow hit, the expected ‘saving’ on the premium could ultimately cost much more in the long run. Be careful of false economies.

Centre pivot irrigators are extremely vulnerable to wind damage, particularly on the Canterbury Plains. Damage to pivots following a windstorm, or any other insurable event, could be enormous.

Fixing a centre pivot might cost $300,000.

However, the wider impact of loss of income and additional feed costs could increase this yet further. Irrigation equipment should always be insured for its replacement value.

Following an insurable event, farmers should be ready to lodge a business interruption claim on the basis that cashflow will suffer because the irrigator is out of action. During the September

2013 storm, substantial damage occurred to many pivot irrigators. After that event, farmers whose irrigators were insured under a material damage policy were able to receive the benefit of a business interruption claim. Most farmers, however, were unaware that they needed the material damage cover and were therefore unable to claim for business interruption. This was particularly problematic for the many whose loss due to business interruption was greater than the initial repair of their irrigators.

An Aon insurance broker acts on behalf of the farmer,and is best positioned to offer the right insurance programme at the right price. Further, and more importantly, he or she will act as your advocate, providing expert support in the event of a claim.

A closer look...

Sheep and Beef

Beef schedules remain favourable and, with the dairy sector under duress, some interest has deflected to the drystock market. Enquiry for sheep and beef properties lifted during the autumn, while sales and prices held steady. Pastoral properties are readily finding buyers, though without new listings, which are unlikely, little sales activity will occur through the winter. These properties offer potential for manuka and beehives, otherwise unproductive hill country has become highly coveted by apiarists and investors. Notable recent sheep and beef farm sales include a 186 hectare Maungatautari property 15 kilometres south-east of Cambridge, which sold to a neighbour in March shortly after passing in at auction when bidding stopped at $5.05 million; and a 1,274 hectare Mahoe hill country breeding property 16 kilometres north-west of Waitomo, which sold by tender in May at a price firm on current values.

North Island Dairy

In early autumn North Island dairy property activity was at a low ebb. Since then, finding ways to operate under the reduced payout, farmers have gradually become more positive.

Generally mild weather and favourable interest rates help. Market enthusiasm is reappearing and potential purchasers are enquiring again. A number of potential buyers are cashed up from past sales and are now looking to return to ownership. As and when they commit to purchase, they will provide the market with the impetus it has lacked over the past few months, likely including motivating more potential sellers to list farms in the spring. Recent Bay of Plenty sales include a 140 hectare irrigated Galatea farm averaging 193,000 kilograms of milksolids, and a 60 hectare Rangitaiki Plains dairy unit. These properties reached $32,000 and $49,000 per hectare respectively, both prices firm on recent expectations.

South Island Dairy

In Canterbury and Southland, few dairy properties sold during the autumn, mainly due to the difference between the amount buyers are prepared to offer and what sellers are willing to accept. This gap should close in spring, when sales are likely to resume with greater frequency. Fewer dairy property listings than usual were offered to the Canterbury market in autumn while, in Southland, the number of properties for sale peaked around January. Overseas investors and first-time buyers are also taking an interest in South Island dairy farms. Farmers have faced the cashflow challenge associated with the reduced payout, altering their inputs

and frequently reducing stock numbers. This should enable most to negotiate the winter in the expectation that product returns will improve in the new season.

Viticulture

This year’s grape harvest combined excellent yield and superb fruit quality. While interest in Marlborough viticulture land remained strong, few sales occurred through autumn. Blocks across the Wairau Plain command interest at values around $180,000 per hectare, while reports of a Rapaura vineyard making in excess of $250,000 per planted hectare show how positive the market has become, as larger wine companies expand their footprint. An 8 hectare Hawke’s Bay vineyard near Taradale was purchased for $1.1 million, with the intent of land use conversion to apples. Post-harvest, a number of blocks are likely to go to the market through the winter, which should attract both local and national interest, with Auckland investors likely to be particularly active. Available bare land for vineyard development remains at a premium and will also likely come under heavy demand during the winter if offered for sale.

Kiwifruit

12 hectare Pakowhai property sold for $1.45 million, and an 8 hectare Mangateretere orchard sold for $1.25 million. During the winter, the market is likely to be tight, though some owners may be tempted to exit, capitalising on high values.

Cropping

Sales of the most fertile arable country, in a tight band of Mid Canterbury, are rare.

However, two farms in this blue ribbon category sold during the autumn, adhering to recent benchmark values between $47,000 and $50,000 per hectare. Four further properties in the Pendarves-Rakaia area, with the same characteristics, are on or shortly to come onto the market in late autumn-early winter. Ranging from 200 to 250 hectares, all these farms are spray-irrigated with soil types ranging from Lismore to Chertsey to Templeton. Again, there is no shortage of buyers. For cropping farmers, while the dip in dairy fortunes has reduced demand for feed wheat and feed barley, driving prices down, demand for potatoes and small seeds such as clover, grass, onion and carrot remains strong, leading to no shortage of rewarding options.

Kiwifruit orchard sales continue to surpass records. Last autumn, a few top gold orchards sold for $500,000 per canopy hectare. This year, similar properties should net $650,000, while a few have sold for $700,000. Illustrating the sector’s capital gain, a 2.5 canopy hectare Te Puke gold kiwifruit orchard was offered to the market recently for $1.6 million. It last changed hands in 1992 for $133,000, phenomenal appreciation in 24 years. Demand for quality orchards outstrips supply. Some significant sales of horticulturesuitable land around 80 hectares in size have progressed recently, as orchardists purchase dairy farms for conversion, this in anticipation of acquiring new licences when Zespri releases its next tranche of new cultivars. As usual in the sector, property sales are likely to diminish until October as orchardists focus on maintenance and preparation for next season.

Pipfruit and Stonefruit

Overseas demand for apples, particularly from Asia, is heavy and exporters are achieving good prices even before their produce leaves home. Demand for orchards therefore outstrips supply, so pricing is favourable. Values for good horticulture land in Hawke’s Bay currently sit between $80,000 and $90,000 per hectare, though prices for smaller lots may be closer to $100,000. Apples tend to be the primary land use, though cropping and viticulture can provide additional options. For some purchasers, Hawke’s Bay’s pip and stone fruit orchards provide a lifestyle opportunity, leasing their productive land to exporters. Recent benchmark sales include a

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