General confidence to invest in the rural real estate market heading into 2021 is very positive, in stark contrast to the last three years' market headwinds.
While the challenges that have been present for some time remain, particularly the uncertainty with environmental planning and bank credit, the market is responding, driven off the back of proven returns. This is reflected in the significant role our primary sector now plays in NZ’s economic recovery, as other export sectors recalibrate post the impact of Covid-19. In addition, very low bank deposits continues to drive investment from the city in favour of the country, notably horticulture.
Our top five picks that will underpin the demand for land this year include:
1. Demand for quality horticultural land will continue to outstrip supply - particularly for Kiwifruit gold where momentum buying for quality orchards has yet to find a ceiling. Origin Capital Partners went to the market seeking $50m for kiwifruit investment and now expects to have $80-$90m. MyFarm had an unprecedented year in 2020 with $185m invested, most of which was in horticulture.
2. The auction price of carbon will underpin the land market for traditional sheep and beef hill country farms as the carbon price tracks to $50 a unit over 2021. Currently, at $38 a unit up to $10 on a year ago, and demand for permanent forest land continues to exceed supply.
3. The Overseas Investment Amendment Bill (No3) 2020 we anticipate will find support, where NZX listed companies will be allowed to go from 25% to 49% foreign ownership and rural lease terms extended from a maximum of three to ten years. Both measures would encourage new investment, retain NZ ownership/control and accelerate repayment of NZ Agri borrowing.
4. Irrespective of any changes to OIA policy our view is long-term leasing of NZ farms, particularly large-scale dairy farms, will feature more this year than any prior period. The separation of the land-owning entity from the operations makes the land-owning entity attractive to new city investment, including an outright sale, similar to the commercial sector.
5. Both economically and politically, the tide is changing in favour of our primary sector. Labour has captured a significant share of the rural vote and has the prerogative now to reset the pace of change, with a more measured environmental approach, particularly the timeline to achieve freshwater standards and associated farm practices. This will underpin confidence more generally.
There are always forces at play with commodity cycles, currently its the exchange rates and the unintended quota consequences with Brexit. The biggest and most obvious however is the ongoing impact of Covid-19 on our international markets. To date, our NZ primary products have held-up well.
So, as our land owners look to their own objectives and priorities for 2021, if a land sale or purchase is on the radar, rather than relying on the crystal ball and New Year predictions, give us a call. We have invested more into our rural team the last 12 months, than at any time in our 35-year history, and its showing in our results, and the confidence vendors have placed in us. Our qualified rural consultants independently assess every property, with the appropriate marketing campaign options recommended, backed by our national True Team coverage and our strategic Farmlands Cooperative partnership.
Please take the opportunity to consider participating in our Autumn Rural Outlook; we sold 68% of listings presented in this format last autumn. Our Rural Outlook closes on the 26 February so don’t hesitate to get that professional second opinion, we are all back on deck and here to work through the options.