Hawkes Bay Rural Property Report

5/10/2012
Hawke’s Bay Property Market Overview

MAJOR food processors' expansions in Hawke's Bay do not seem to be helping cropping land values, says Napier valuer Mark Morice.

He said profitability on the Heretaunga Plains was at a low point thanks to the high dollar. “The outlook is for land prices to remain relatively weak until increased profitability returns to primary industry businesses based on the plains,” he said. “One exception to this is the kiwifruit industry where this year they are enjoying good returns from a favourable crop that is not affected by Psa”.
“Climatically the 2011/2012 summer has been challenging, particularly for ground-base crops and stonefruit, and whilst it has generally been managed, it is particularly taxing on the growers when returns are also poor.”

He said only poorer cropping land values were falling.“It appears that land values are holding with prime cropping land between $55,000/ha-$60,000/ha, second class cropping land at $30,000/ha-$40,000/ha and third class cropping land at $15,000/ha-$25,000/ha,” Mr Morice said. “The increase in demand for process cropping from Wattie's and McCain does not appear to have resulted in an increase in demand for cropping land. Due to the high dollar, export cropping returns have been relatively weak therefore there has been little demand from the large operators to expand their operations. Cropping land values are expected to remain relatively static in the foreseeable future.”

REINZ figures released yesterday showed Hawke's Bay farm-sale volume is well down compared to the rest of New Zealand. Nationally there were 207 more farm sales (+108.9 per cent) for the three months ended March than for the three months ended March 2011.

Hawke's Bay recorded four fewer sales (-26.6 per cent) in the three months to March compared to the three months to March 2011.

Mr Morice said the figures reflected poor returns from orchardists and vineyards, plus Hawke's Bay was not as exposed to the buoyant dairy sector. For the three-month period there was just one forestry block recorded as sold, three finishing, five grazing, one horticulture and 52 lifestyle blocks. The median selling price per hectare for the grazing properties was $6692.

Mr Morice said some sectors saw good activity last year. “In 2011, 16 sheep and cattle properties greater than 200ha transacted in the Central Hawke's Bay and Hastings districts,” he said. “This was a significant lift from just seven sales during the 2010 year but still well below the average of 28 sales between 1999 through to the peak in the market in 2007.

“On a positive note, four of the 16 sales were for large-scale farms of greater than 600ha. To date, 2012 volumes have been slow with just two sales registered. “There has also been a dairy farm recently sold near Norsewood, being the second dairy sale which was not of a forced nature, since March 2010.”

“Average land values have remained steady since 2009 however, we consider this is due to the lack of sales which has resulted in the majority of sales being above average properties within desirable farming localities. This is typical during a period of low sales volumes.''

The orchard market was flat. “The number of genuine orchard sales in 2011 was less than five, and in 2010 less than 10. For the period 1997-2007 the average number of sales per year was in the order of 25,” Mr Morice said. “Lack of profitability has had a significant impact on the market, which together with the drop in demand from the lifestyle sector has meant that orchard sales have been very limited. Despite this, values have remained relatively static over the last three years with average land values in the order of $50,000/ha and average land and tree values in the order of $60,000/ha. Should financial pressure increase the number of properties for sale, it is expected that values will fall due to an unlikely increase in demand from purchasers.”

There was widespread awareness of the depressed vineyard market, but Hawke's Bay had fared better than other regions. “The viticulture market is again driven by three main factors being smaller contract growers wishing to exit the industry due to lack of profitability, amalgamation of medium-sized wineries to create economies of scale, and larger wineries purchasing prime land,'' he said. “Last year saw an increase in sales of vineyards totalling nine versus four in 2010, and six in 2009. Both land, and land and vine values have been declining since 2009, particularly with a larger drop in 2011 due to a number of sales that were of near forced in nature.”

Last year the forestry sector dominated land sales in Northern Hawke's Bay.  Mr Morice said, “There were considerable increases in land prices as a result of the high carbon prices for the first half of the year. Northern Hawke's Bay is where foresters were able to compete with the pastoral sector and were paying up to around $3500/plantable hectare. The only sale in the Hastings district was a property close to the Port of Napier with productive land values around $4500/ha. There have been no sales for carbon purposes in 2012, most likely due to the currently subdued carbon price around $7.50/tonne as well as considerable expenditure required for planting the vast amounts of land acquired in 2011. “There are limited pre-1990 land sales, these are occurring at levels considerably less than post-1989 land due to not having the benefit of being able to trade carbon. Looking forward, until carbon prices increase significantly to levels seen around the start of 2011, the forestry sector is less likely to influence pastoral land values.”

APN story by By Patrick OSullivan from www.hbtoday.co.nz
 
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