The rural property market remains anaemic, with sales of farms and lifestyle blocks remaining at very low levels.
The Real Estate Institute of New Zealand recorded 173 farm sales over the three months to the end of October, down 36% compared to the same period of last year.
Lifestyle block sales were similarly depressed with 1242 sales in the three months ended October, down 28%.
Rural property sales generally follow regular seasonal trends with sales declining over winter and then picking up again over summer, with those trends clearly evident in the graphs below.
This year has been no different, except that the winter low has been deeper than previous years, suggesting the summer pickup may also be at a lower level than normal.
"This significant reduction in sales strongly mirrors the situation being experienced in the residential market," REINZ rural spokesman Brian Peacocke said.
"One of the major factors is inflation and the resulting increase in the Official Cash Rate, which is driving up interest rates.
"Issues relating to the levels of equity, cash flow and serviceability for potential borrowers are being heavily impacted by the increasing interest rates, which in turn are heavily impacting sales volumes across the country," he said.
However rural property prices have not been as badly affected.
The REINZ All Farm Price Index, which adjusts for differences in the mix of farms sold each month by size, type and location, was down just 1.6% over the three months to October this year compared to the same period of last year, while the median price of lifestyle blocks sold rose 7.7%.
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42 Comments
Ideally we'd have the graphs back to 2019 to compare to the 'before times'.
The lifestyle vendors and the real estate agents representing them have become so rude and greedy.
They are asking millions for just a small piece of land with minimal services attached.
Seems like we are living in a delusional world where we think Money grows on trees and we can just pluck it to use.
Imagine if farmer Brown was allowed to subdivide off any piece of his own land so that we could actually allow more to live the sustainability philosophy. Instead, it is apparently more beneficial to allow them to instead sell large blocks of land to foreigners to plant pine trees.
Working from home off grid requires creates minimal if any extra infrastructure demands on others.
I am all for this as I wouild be able to chop up my 15H....
Personally, I like having an urban/rural zoning divide. Urban sprawl around every previously rural road isn't my idea of paradise. I guess once livestock farming becomes a losing prospect, you'll get your wish though?
I have been scratching my head for some time trying to understand how these small 2H blocks in Diary Flat etc sell for so much money.
Large enough to be a hobby small enough not to be much of a burden.
Wont people in Dairy Flat be hoping that they can subdivide at some point in the future? A lot of development out that way and new highways going in. Pretty much a straight swap for a house in Central Auckland and you get a different lifestyle while being able to commute.
Yes they can subdivide there 2H to 2x 1H
For the last couple of years that's exactly what they think. Due to central bank stupidity money has more or less grown on trees.
How else were we going to afford all this stuff?
Yes I think there is a lot of greed with lifestyle property. Hard to see the value in the properties that some are asking. They will need to reduce expectations on them.
I wonder what impact this will have over the coming years:
https://environment.govt.nz/publications/national-policy-statement-for-…
Hastings District Council already have a plan in place whereby it is very difficult to subdivide properties in the Plains Production Zone into small lifestyle blocks. They actively encourage the creation of larger rural properties to improve economic viability, by generally only allowing the sale of subdivided land to neighbours.
Great for the future of food production, and great for me as someone who is already eyeing up the neighbour's paddocks. Not so great for developers looking to create 4,000sqm LSBs, and not so great for my neighbours who have a market of exactly 3 buyers should they wish to subdivide.
Taranaki Regional Council are working on a similar plan.
Bureaucracts are not in touch with reality. They are flying in their own lala land.
When this happened last time where kings and clergy had no idea what peasants were going through, there were a few revolutions. May be every other century needs its own.
Councils dominated by landowners and the like looking after their mates. Endemic across NZ - one reason our waterways are such a mess.
My 15H is hard to be a productive unit, though there is an egg farmer oppisite me who is doing well and was on Country Calander just a while back, so if inventive you could make a 15H block pay..... we could breed sport horses no issues.
The NPS HPL is very arbitrary and prescriptive. If your title has any class 1, 2 or 3 soils anywhere within it you can't do a subdivision no matter the size. Aside from this regional councils are anti rural subdivisions in any land class because....? Climate change! More distance to town equals more emmisions they say.
There is an agenda here to drive densification like NZ is not used to or adapted to thrive under.
We better start looking at how we can eat pine-trees
I have a chuckle each time I pass a Life Sentence Block with a "Fresh Eggs" sign at the gate.
https://www.tvnz.co.nz/shows/fresh-eggs
(NB: To your next question - Yes I have. It's now a Private Golf Course)
A mate calls them DeathStyle blocks
If there's a decent enough horticultural industry nearby you can always just lease the land out and someone else can farm it.
Bigger and more expensive equipment will be more financially productive, but you need hundreds of hectares to justify the outlay.
Through use of ferts, sprays and petroleum chemicals the land can become contaminated. Then cannot be built on without expensive removal of top soil. Think twice before leasing out to horticulture
& Selwyn, Waimakariri...
The recently announced National Policy Statement on Highly Productive Land prevents district councils from allowing subdivision of class 1 and 2 land, which effectively rules out any future subdivision on any flat land unless it is in the back of beyond.
This chart would be usefull if you overlaid the sales numbers of the upper quartile of general NZ real estate on it. People often sell city move to lifestyle then sell lifestyle to retire back in secondary city areas, ie Devonport to Diary Flat to Orewa or Matakana etc....
The lack of people being able to find a buyer in the city explains lack of lifestyle sales to me without much further digging. Also there is some element of vendor realisation that your purchaser is not getting as much for their city site, so you may need to adjust down to make a sale. Many get more for city then they spend lifestyle which may explain the slight rise in lifestyle prices even tho sales numbers are down.
The entire real estate market is like a Mexican standoff at the moment.
I see combover is still busy making educated guesses in stuff today At least ANZ being honest the risk to there view.-18%, is now lower
Something is also missing here.
The traditional pipeline into life sentence blocks is usually a couple with a few kids who want to settle there. They are usually owning their 2nd house in the suburbs and want more space or a better environment.
But the housing bubble has cut the path away from those people. The path of buying a shitty two bedroom place when you are DINK, moving to a bigger place with Kid 1 or Kid 2 then going to a LSB is delayed enormously by how unaffordable they have become.
The average age of farmers is also incredibly old, something like 35-40% of farmers are pensioners. Back breaking work which is really for younger men.
Von, the average age of farm owners might be pensioners but how many of them still work the land?
Certainly older owners working is much more prevalent with sleepnbeef than dairy. Dairy owners way more likely to own multiple farms.
What interest rate would a farm purchaser be paying? I see that Heartland's Sheep and Beef direct now have 8% interest for purchase of a farm but there is a requirement of 50% equity. The rural base rates from the other banks are around 8.85% but is that the rate you would pay for a farm purchase?
Depends on what sort of farm, but expect to pay 1-3%+ over floating residential rates.
I've never understood why residential rental properties aren't similarly encumbered with commercial rates. They are essentially a business.
Often if it's a straight investment purchase banks can charge higher rates and premiums.
The commercial rates are as such due to higher risk.
Higher perceived risk. Surely in our current environment this should change. Housing is about to take a monumental bath.
Knowing that it's a commercial risk requires a form to be honestly filled out.
Higher actual risk.
If a business goes south (more common than not on a new business especially), the recoverables are often cents in the dollar.
Most housing debt is recoverable, and the default rate is far lower.
The housing market is currently not going great, whether you think that's going to become embedded is conjecture at this point, but even if so, likely business fortunes will also deteriorate.
There is not enough information here to draw any conclusions. Are there more on the market? It could be that there are fewer sales because people are holding them for longer. It was better to be locked down on a lifestyle block than in town during covid. More working from home means people can work more easily in rural areas. We got our bit of dirt for less than a modest town house, however lifestyle blocks do drain cash and there are many challenges. For now, I still prefer it to having my neighbour 2m from my window.
If anyone can sell me a farm that sustainably nets 30% return, I'll buy it tomorrow. Farm debt has made that an impossible dream? Blame the banks..
That's certainly possible, although you may not like the amount of effort required to generate the 30%.
‘I don’t want to be here farming by myself’ | Stuff.co.nz
https://i.stuff.co.nz/business/farming/130535775/i-dont-want-to-be-here…
As productive land disappears, whats that going to do to the price of goods at the farm gate. There is also more mouths to feed.
Then while we charge farmers a tax for methane, I found out recently that methane is not the culprit.
This country is mad
Good article.
Interesting comment on dairy farm employment backed with the stat on school kids.
Have you seen that in your area too. The family farm in taranaki has its share of dairy
Interesting that in all those photos , there are probably around 1/2 the number of trees required to qualify as ETS forest . Some planned planting , and they could get the ETs payments , and continue grazing. Plus have fodder in a drought. Are the farmers not seeing the wood for the trees?
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