Positivity on the horizon?
Winter is a season that serves as a reset for the upcoming spring on farms in rural areas. It involves many activities such as staff changes, the settlement of new farms, managing time off alongside maintenance tasks, and consistently monitoring the health and well-being of animals.
The previous season presented numerous challenges, including increased costs coupled with falling product prices across all farms. The North Island experienced a particularly wet spring with continuous rainfall events. However, this weather pattern resulted in balanced production and exceptional grass growth throughout the summer months.
The returns from the beef and lamb sectors have been fluctuating throughout the year, eventually settling at $7.15 per kilogram for lamb and $5.50 per kilogram for a P2 Steer at present.
Recent developments indicate a rise in rural cost inflation across all expense categories. In fact, over the past year, all 21 expense categories experienced price increases. The key drivers behind this inflation include a 45% average increase in debt servicing costs, a 33% increase in fuel costs, a 28% increase in fertilizer prices, and a 13.4% increase in feed costs.
The second half of 2023 is expected to bring some positive changes
Rural cost inflation is projected to cool down rapidly, commodity prices are on the rise, and interest rates are approaching their peak.
So, what does all this mean for the real estate market in the Central Plateau region, specifically for farms?
Buyer interest in rural properties remains high, especially since the onset of the COVID-19 pandemic in 2020. Investors are seeking secure investments in land. Property values are influenced by various factors, including but not limited to production capabilities, location, compliance with regulations, and available infrastructure. However, the supply of listed properties has been limited, as almost all the properties listed in the past twelve months have now been sold.
In contrast, the lifestyle market, which is closer to the residential market, has experienced a decline in values. The post-COVID surge in prices has receded significantly, with lifestyle properties now seeing a decrease of as much as 10-15% compared to 18 months ago. The median number of days to sell for lifestyle properties was 28 days more in the three months to March 2023 than in the three months to March 2022, sitting at 71 days.
Stats sourced from Stats NZ and REINZ
Why winter is a great time to sell
Staff are not stressed with calving or busy doing other jobs
No sick or penicillin cows hanging around the farm/cowshed
A great wedge of grass on the farm (High Pasture Cover)
Winter crops look great
Less stock movements on a daily basis, making it easy to view.
People looking have plenty of time to view and do their due diligence
Less competing stock on the market
Admin/support staff are not so busy
Better deals and opportunities around marketing your property e.g. winter promos
