Greg comments in a Hawkes Bay Today Rural Property Market Article

May 31, 2012 at 4:31 pm

The Hawke’s Bay rural real estate market was one of only two regional markets to experience a fall in volume according to REINZ figures.

REINZ rural market spokesman Brian Peacocke said despite the highest number of farm sales nationally in the three months since August 2008, there was a trend towards declining volumes – a sign the market could be cooling.

The median price per hectare for all farms sold in the three months to April 2012 was $18,61, a 7.2 per cent decrease on the $20,056 recorded for the three months ended March 2012 and up $679 per hectare (+3.8 per cent) on the $17,938 recorded for the three months to April 2011.

The Hawke’s Bay market is “very mixed” says valuer Greg Morice of Morice Ltd.

“There is strength being shown in the pastoral sector but weakness in the horticulture, viticulture, arable and lifestyle sector,” he said.

“The scenario is of low interest rates, high product prices, a favourable summer for growing grass, and the expectation is that the land market should be buoyant. In an odd way it is, but not as reflected in the latest REINZ market report.”

There were 27 farm sales in Hawke’s Bay in the three months to April, compared with 20 for the same time last year. Hawke’s Bay and Otago were the only regions to experience a fall in the number of sales.

Nationally, the total number of sales was 443 compared with 290.

“Currently with sheep and cattle farms it costs approximately the same to purchase and stock a farm now, as it did in the peak of the market in 2007/2008, with the price of stock increasing and the price of land and buildings decreasing. Therefore the borrowing requirements of a new farm purchase are as high as during the peak of the market,” Mr Morice said.

“The drop in the number of transactions is a twofold issue with a lack of good quality property currently for sale, and a preference by farm owners to address their risk exposure to debt. After a series of droughts, and the current recession, many farmers identify they require larger buffers in their systems, so a reduction to exposure of debt is considered important.

“With the regard to land values on the Heretaunga Plains, this is of the most concern for Hawke’s Bay as virtually all industries, with perhaps the exception of the kiwifruit industry, have had, at best, a mediocre year.

“Returns from exports have been hampered by a high dollar and a cool spring and wet summer has delayed maturity and caused some quality problems in most crops grown this year. This has caused the land market on the Heretaunga Plains to virtually stagnate with little demand from prospective purchasers, and a number of prospective vendors not wishing to test the market.

“There has been a trickle of viticulture sales, predominantly out of necessity to sell, and these sale prices are back considerably on vineyard values three-to-four years ago. There has been very little activity in cropping or pipfruit land sales and there is an expectation that if there are a significant number of forced properties placed on the market in the near future, those values will further decline. May to July are the main selling months for orchards, yet this year there have been very few properties coming to the market.”

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Entry filed under: Rural Market.

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