This next decade will see ongoing demand for land

This next decade will see ongoing demand for land, everything from urbanisation on town boundaries to bioeconomy pressures impacting our more extensive hill country. Neither are short-term trends.

Our recent Property Brokers national rural conference held this August helped our business gain a much better appreciation of the forces at play driving land use change across rural New Zealand and reflected in the 55,000 ha of rural land Property Brokers sold last season.

The pressure from urbanisation on local government infrastructure is now at a critical tipping point, but rural land continues to be re-allocated in favour of urban communities. This is generating record capital gains for rural properties adjacent to town boundaries, often at the expense of our best soils and even some of our most revered research farms.

This notion of a bioeconomy and its impact on rural land use change is far less understood. As the world sets about dramatically reducing its reliance on fossil fuels, New Zealand Inc has just got to the start line. Recent headlines with Emirates Team NZ taking flight with its hydrogen chase boat is a great illustration that changes are happening faster than we think. The same can be said for leading heavy transport companies such as HWR and their future plans for dual fuel (hydrogen).

The opportunity for farmers with large tracts of land to actively look at; forestry and associated carbon or leasing to solar, wind, biofuels, and other yet-to-be-established land use options are now very real.

These opportunities are not solely the domain of large energy companies or corporations looking to offset carbon emissions. Farmers, large and small, are likely to have a much bigger say over what tree gets planted where in support of their farming business. Farmer groups with a shared long-term commitment to their district may even end up collaborating (e.g. mini forestry and carbon cooperatives) to strengthen their local pastoral businesses. Not unlike what has happened in the past with locally owned farmer-controlled irrigation schemes.

Today as the notion of a bioeconomy becomes a reality, the quantum of the potential land use change, particularly on the North Island’s East Coast farming communities, is akin to the mid-eighties and early nineties, where the forestry land use change was felt for many years after. What was clear then, and still is now, is that there is no going back.

Last season we had over 10,000 ha sold outright to forestry and carbon interests, and solar has been part of this too. We don’t see this trend changing; in fact, demand continues to strengthen.

NZ timber as a renewable product and associated potential bioenergy capture is a dramatically different story to the forestry returns promised to farmers but never received back in the 1980s and 1990s. Today many of the future scenarios envisaged are far less about exporting saw-logs and much more about renewable higher-yielding products. Distance to port which dictates so much of the current valuation modelling today, may change dramatically as new processing develops. ln the interim, the ETS offers an immediate hedge on what may or may not occur in the future, significantly shortening investment pay-back periods on new planting.

Finishing as we started, land is a finite resource; this has never been truer than today. Farmers who choose to hold their land over the next decade are likely to benefit significantly from both the very apparent need for sustainably produced food, and the obvious value capture as demand for land exceeds an ongoing shortening of supply.

All indications are that the bioeconomy will be huge for NZ landowners over the next decade, but it will require change; not all of it is welcome.

Our farming outlook is very robust, and for those looking to exit this season or next, should have no stigma attached to their decisions. These are windfall capital gains, the likes of which we’ve never seen before. Many of these owners have farmed for little cash return, most of their farming lives. Previously these same stations five years ago would often go on the market from one season to next without an offer tabled.

Our hope is that more farmers continue to be on the other side of the buy/sell agreement. The outlook has never been stronger for NZ land-based industries, and our primary sector continues to underpin our economy.

For those farmers with a growth mindset, the cliche of buying and selling on the same market applies to all land uses, not just pastoral. So, take advice on the full extent of your current property rights, including carbon, and any opportunities to hedge these returns for the future.

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.