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Rural sector has grit


Though we still have a few busy months ahead of us before wrapping up the year, we’re starting to see 2022 in the rear vision mirror and planning ahead – just as our clients are.

Transaction levels in the rural property market are traditionally buoyant through spring, and we’re expecting to see a further lift in activity as the rural sector expands on the back of continued strong fundamentals.

Our food and fibre sector has carried New Zealand’s export-led economic recovery post-pandemic, accounting for more than 80 percent of the country’s total exports in the year to 30 June 2022.

Producers have faced a myriad of hurdles from supply chain challenges and labour shortages, to climate change compliance, water and land management reforms, weather events and escalating inflation – but if there’s one thing we know for certain, the rural sector has grit.

The regulatory environment remains a challenge for farmers and while sometimes it seems like one step forward, two steps back – hopefully, tangible progress is being made.

Land value growth has been impressive, but this cannot last forever and we’re anticipating some recalibration in coming months – despite the rural sector being in very good heart.

Dairy has had an incredible run as the sector capitalises on solid commodity returns and recapitalises its balance sheets.

Rabobank's Q3 Beef Quarterly Report paints a rosy picture for beef exports in the coming season, given solid global demand and a favourable exchange rate.

The kiwifruit sector has done a pretty good job considering it’s faced some headwinds, with the pandemic environment emphasising New Zealand’s need for a resilient and accessible labour market and particularly, the RSE schemes that support the horticultural industry.

While some of the supply chain challenges have finally caught up with the kiwifruit sector, the outlook for growth is supported by labour force fundamentals starting to reset.

A lack of labour is a huge restrictor for any sector that relies heavily on an active and experienced workforce, so let’s hope the constricted market bounces back quickly as the country’s border entry thresholds ease.

Change of land use continues to be a constant theme running through the entire rural sector and although the Climate Change Commission chair Dr Rod Carr recently stated the Emissions Trading Scheme needs reform because it allows companies to “plant and pollute”, the carbon tussle looks set to continue in one shape or form as the price of carbon lifts and the market adapts.

The proposed removal of forestry conversions from the Overseas Investment Office’s (OIO) special forestry test for offshore parties buying bare land means we could expect to see some land deals take longer to transact at a structural level, and whether there will ultimately be a different outcome is yet to be established.

On the back of continued strong dairy returns, the rural sector as a whole is far better capitalised now.

Banks are supportive and lending money, there’s a lot of opportunity in the market, and we’re seeing good activity levels for properties with scale, with transactions reflective of genuine productive values.

Meanwhile, the lifestyle property market has seen plenty of action in the pandemic’s wake as people weigh up work-life balance.

Working from home or hybrid work models are now accepted practice, there’s more resilient rural broadband, and with fuel prices high, people are realising that a lifestyle property gives them space, a certain freedom and a great place to raise a family.

Further change is now clearly on the horizon for rural landowners with the introduction of the National Policy Statement – Highly Productive Land (NPS-HPL) designed to protect New Zealand’s most productive land from urban development. While councils are yet to work through the detail, it will have an impact on the future subdivision of rural land.

If spring signals a fresh start for you, and rural property is on your radar, then talk to us.

Bayleys’ country team is well-connected, proactive and respected in the rural market and we’d love to provide some guidance.


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