Market update

Conrad Wilkshire General Manager Rural

Nothing about the Rural Real Estate market in 2023 is business as usual!

Welcome to our latest Property Brokers Rural Outlook; we have some excellent properties on offer to the market, and we have high conviction they will be successfully sold, despite the economic and ‘actual’ headwinds that continue to be such a feature of 2023. This summer is not likely to be forgotten in a hurry, notably because it never arrived in the North Island and, at the time of writing, has yet to leave the South.

The devastation of the cyclones has been felt by us all collectively as a nation. For impacted regions, it’s hard to put into words the task in front of people as they rebuild; their homes, their businesses

New Zealand Rural Sales Market

and their lives and still support their communities. Having been part of a leadership team that led the earthquake responses with FMG, if there is one thing I know for certain, it’s our genuine human capacity to work through the issues, and get through the other side of these events. We all have the ability to find that extra low gear when we really need it. And we really do need it just now. Like everyone else, Property Brokers is on the tools, trying to figure out how to help our clients and stay across all the relevant updates. We remain committed to being part of the solution and staying close to the people most impacted.

All Rural Sales 20ha+, 7 Months Year on Year

On matters of real estate, specifically rural real estate, our Rural Outlook publications in both Spring and Autumn are our flagship promotions, campaigning our vendor’s properties from the far north to the deep South. They also reflect our opportunity to provide a ‘stock take’ on what we see in the market and note the key drivers.

I’ve been contributing to that conversation for the past five years, seeking to reflect the views of our team and the conversations we are having with our clients whilst noting the broader influences impacting our primary sector.

As more time marches on, we’ve got less preoccupied with worrying about if we’re talking the market up or down, we now let the numbers do that, and instead, our focus has been on what seems like a market outlier, trend or impact.

This time last year, we took extra steps to suggest the window available to sell Hill Country looked like the most significant market distortion opportunity in 40 years of rural real estate. We also highlighted in 2020 that dairy farms looked significantly undersold and represented excellent value as the market limped along with 150+ dairy farms sold that season and a median value of $32,600/ha.

To try and provide a perspective on what is actually happening right now, is probably the most challenging commentary to make in the last five years. Hence, I’ve asked the team across key regions (they are all key!) to provide their perspective, to try and emulate what I catch up with, getting around on AirNZ ATR’s burning up the carbon as I do.

For those who want the executive summary and the headline numbers, we can confidently say the market is back a third on last year’s Spring/Summer period, both by number and value of sales. Dairy, which has such a strong influence on the underlying value of the rural property market, is back $310m (-35%) in sales for the seven-month reporting period to the end of January 2023. However, the median price is holding both nationally and regionally on last year’s valuations. Hill Country sales similarly, while back by number, values per hectare have held up, but there is a lot of uncertainty now about how long this will continue. Horticulture valuations have been robust in recent years. Still, the consensus is that valuations are past 12 o’clock and likely to reset this year significantly. That view predates the recent cyclone devastation.

If there was ever a year to talk to my team, this is it. Quoting national median prices is likely to serve you poorly.

As you read the regional reports, you will quickly establish that it’s mainly the tier 1 properties that are selling and flattering the median price, particularly for dairy. It has not been a full clearance in the market this season.

If record-keeping and consenting processes are ambiguous (there are probably less flattering descriptions), buyers continue to discount properties at levels unacceptable to vendors. On past trends, this stand-off could go on for some time, in fact, years. Hence we continue to provide as much vendor support as possible, linking subject matter experts well ahead of time to bridge the gap in terms of understanding and the value gap created.

Our clients have access to a swathe of economic reports, but in the spirit of pointing out the outliers, the current successive increases in the Official Cash Rate are right up there (refer chart). The speed of these increases and their impact has yet to register in Wellington. But it’s had a significant impact, moderating the risk appetite of buyers. The strong commodity cycle has assisted confidence, but nothing trumps doubling the cost of borrowing in less than 12 months combined with a squeeze on operating margins across the entire sector. In our business, property sells either on the way up or the way down of the cycle. The fundamentals of our primary sector are powerful. These are not words; they are facts, as our primary sector is still forecast to contribute $55 billion to NZ exports. Our job is to establish a willing buyer and willing seller. In our experience, if the buyer is not at a level, given the underlying strength of the sector, particularly pastoral, things don’t sell, and buyers historically have missed real opportunities to capture value.

To close where we started, this is not a normal year. Getting advice and understanding what’s happening in your district has never been more important. Our pick is those buyers who step up this year at realistic levels for properties outside the dress circle locations will be rewarded over time. Our industry was built on challenges. That’s what created the opportunities.

For rural and lifestyle property advice from a national team of committed salespeople, supported by our expert marketing team, right across New Zealand, call 0800 367 5263 or visit pb.co.nz

Conrad Wilkshire General Manager Rural Property Brokers Ltd