Tararua and Central Hawke’s Bay rural real estate markets on a roll, despite higher interest rates this spring

Tararua and Central Hawke’s Bay rural real estate spring sales (August to October) equal $39m by value from nine farm sales, well up on $11.6m from 4 sales the same time last year.

This East Coast rural sales region continues to offer great options to buy and sell, well ahead of other regions nationally. Reflecting a strong farming base with owner-operators prepared to trade farms to get ahead and obviously competing land use options too in this region. Dairy sales are slow to start this season. However, we expect dairy to win out over the course of the season as the market resets given the underlying economic strength of the dairy sector.

Farmer borrowing costs have doubled over the last 12 months, and while access to rural credit has improved, the cost of it is weighing heavy on farmer and grower attitudes towards taking more risk. Last season was the reverse, where rural debt had never been cheaper but accessing it was not a given. The Reserve Bank Official Cash Rate over the last 12 months has moved from 0.25% to 3.5%. It’s worth putting money in the bank these days, and clearly, many vendors are looking to do just that for the first time in a long while.

Many factors are currently impacting farmer confidence, like He Waka Eke Noa. However, these complex challenges are longer-term issues to solve and are unlikely to stop a well-capitalised sheep and beef farmer from buying the neighbouring farm on the boundary. Principally, we sense most farmers share Keith Woodford’s view that our primary industries, in general, and pastoral industries, in particular, are fundamental to NZ’s economic well-being.

The current policy settings must change and align with a shared national commitment to reduce GHG sustainably. Farmers alone can’t carry the burden of the current ‘net zero’ formula and the catastrophic future impact on rural land use. Not least because we are already at peak livestock production with critical supply chains and exports already in the balance.

The opportunity for purchasers to negotiate terms to reflect the current economic reality is obvious. The last decade has seen borrowed money get cheaper and cheaper. The current reversal of that theme is not short-term; anything that takes time to get there will take time to unwind.

In relative terms, current borrowing is still very affordable when we look back. Property Brokers’ approach is time proven. Where there is a genuine buyer interest in a farm, getting parties to the table and undertaking due diligence is paramount. We have vendors committed to a sale process and for those buyers prepared to operate this side of Christmas, finding value, as the market resets is the opportunity.

Equally, vendors that can read the market tea leaves and the forward outlook will appreciate that none of us control the market. As more inventory comes forward in 2023, the opportunity to make a contract work and a realistic return in today’s dollars is all part of making a decision.

Money in the bank now means something again. The default option to continue farming for another three to five seasons and wait the market out is likely to carry a bigger risk than the experience of the last three-plus seasons.

For rural and lifestyle property advice from a national team of committed salespeople, supported by our expert marketing team, right across New Zealand, call 0800 367 5263 or visit pb.co.nz.