Horticulture property market fruitful

While the effect of COVID-related labour and material shortages on the rural sector has made plenty of headlines recently, these issues have had little impact on the property market for farms, orchards and vineyards — at least, so far.

For most farmers, growers, and other primary producers, staying flexible is second nature. Dealing with the present shortages is no exception, and most are making do. Meanwhile, looking at the bigger picture, confidence remains high, with plenty prospective investors seeking to make the most of the more significant trends that favour food production.

Staffing is certainly an issue on the minds of many growers. Our salespeople talk all the time with Central Otago orchardists affected by the labour shortage; likewise with wine growers in Marlborough, those producing Bay of Plenty kiwifruit, Pukekohe market gardeners, and Northland avocado growers — to name a few. While a minority are struggling, most seek and usually find workarounds when their usual sources of labour are unavailable.

Confidence in kiwifruit and vineyards persists

Kiwifruit growers have enjoyed exceptional returns for the past few years. Labour shortages haven’t held them back from harvesting their crop this year. However, there may be some challenges in ensuring packhouses are fully staffed and finding a willing workforce for ongoing orchard maintenance, such as pruning which may hinder some kiwifruit orchardists in the coming months.

Demand for property and the record prices paid in recent seasons, now more than $2 million per canopy hectare for the most sought-after blocks of gold kiwifruit, are unlikely to be affected.

Meanwhile, in Marlborough, ongoing viticulture development continues this year with between 2,000 and 3,000 hectares of new plantings in prospect. Even if a squeeze on labour and materials might delay some of these developments, underlying confidence in the region’s vineyards is strong enough to withstand that.

High demand for land to grow produce

Although Franklin District market gardeners are also short of labour, changing socioeconomic factors mean they have faced this issue, or something similar, for several decades — not just through the pandemic. Automation and the Recognised Seasonal Employer Scheme provide potential — and actual — solutions to staffing shortages. In the meantime, demand for land to grow vegetables is higher than ever. Market gardens that might have sold for $80,000 to $100,000 per hectare a few years ago are now worth double that.

Other influences outweigh labour pressures, and while the demand for suitable property — driven by robust markets for their produce — is so much greater than the supply of available market gardens, that will not change.

Avocados are a slightly different scenario. While returns were on an upward trajectory, that has recently stalled somewhat due in part to a rapid expansion in the supply of the fruit, including from new plantings in Australia, which has cut into the underlying business case for export, at least at present.

Labour shortages are an added complication that has resulted in some avocado growers leaving fruit unharvested this season, and a small number deciding to exit the industry. However, these are generally people who would have been looking to cash up and retire in the next few years anyway, albeit the current situation has accelerated those decisions.

In common with any other market, among orchardists and growers confidence — or the lack of it — is the main factor that will inflame or inhibit the desire to buy or sell. There is plenty of uncertainty in the world right now, which generally holds confidence down.

However, enthusiasm to invest in primary production has largely held firm. When returns are favourable, yields are good, and the food producing industry remains one we all undoubtedly need. So long as bankers acknowledge all that by providing their support, the market will flourish.

On that basis, for those able to tick the relevant boxes as a business, we expect plenty of activity this spring in all quarters of the horticulture property sector throughout the country.

Peter Newbold, General Manager, PGG Wrightson Real Estate