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Never underestimate the strength of a market

Rural

Property Brokers 21 Aug 2020

ConradWilkshireNever underestimate the strength of a market or the long-term fundamentals in support of it, particularly when it comes to both our rural or lifestyle New Zealand property markets.

While the latest 19th August 2020 Real Estate Institute of NZ (REINZ) rural press release refers to ‘guarded
optimism’ there is some significant positive market indicators this last autumn that can’t be ignored.

 

First up there were 341 farms sold for the three months to the end of July, up +30.7% on the same period last year.
Given you could not physically inspect property over April, and lockdown only went down to level 2 on the 13th
May, this is quite an outstanding result.

 

It clearly demonstrates our markets capacity to operate through the cycles short or long term. Rural median prices stayed static at $23,000+/ha for both autumn periods.

 

Similarly, REINZ data released on the lifestyle market noted there were 716 more lifestyle property sales for the three months ended July 2020 compared to the three months ended June 2020 up +57.7%. The net effect being that total lifestyle sales, being 1240 sales for the three months to the end of July was on a par with the prior-year period. To quote REINZ directly “Equally, the figures for the month of July 2020 alone at 913 sales compared to 197 for the month of May represent an amazing 463% increase over that period and a graphic demonstration of the impact of the recent level 4 lockdown.”

 

Property Brokers too, heading into the winter has seen unprecedented levels of interest in real estate up and down the country, and rural and lifestyle sales have been no exception. Our advice to Farmlands shareholders is to get advice! This is whether buying or selling property as every region is different, and within districts, there are often material market drivers to be aware of. The one factor that remains consistent is that markets ultimately track to the long-term averages, and when they bounce, the impact can be dramatic, as recent NZ July rural and lifestyle sales illustrate.

 

The NZ rural property market continues to face regulatory headwinds, and a constrained credit environment, and this has had a material impact on the volume of sales annually, particularly for farms valued in excess of $5m+ dollars.

 

Buyer decisions at this level tend to be very much investment-driven with discounts applied for regulatory uncertainty and any gaps associated with on-farm compliance programs. The good news, however, is this top tier of the rural market, is no different to any other market, once it finds its level the recovery in the volume of sales is likely to be significant. Underlying cash yields of 5-6% look very attractive, and the rural market will adjust to this type of productive valuation approach. The continued strength of our primary sector underpins market confidence both this spring and long term.


 

What is very clear is those clients that reach out early, in anticipation of the due-diligence to ready a property for sale, benefit the most when the decision to take the property to market is made. Due diligence these days can take months, a sales process is often a matter of weeks. So please feel free to reach out to us ahead of time on 0800 367 5263 for a no-obligation professional opinion on the market and sale options for your property.


At Property Brokers, our purpose is to make a difference to rural NZ, both short and long term, starting with you the shareholders of the Farmlands Cooperative.