Continued low interest rates are tempting buyers into rural real estate in greater numbers, but the same economic concerns which are keeping rates low are also impacting on purchasers' confidence, according to First National's latest quarterly rural property survey.
The economic outlook is weaker and the official cash rate remains at 2.5%, so the likelihood is low interest rates will continue for some time, which will bolster purchasers' borrowing power, First National General Manager Colleen Milne says.
But as the Reserve Bank Governor Alan Bollard confirmed on Thursday, weaker agricultural commodity export prices are weighing on economic activity despite a good year for rural production.
“First National's network of offices across New Zealand report that worries over the economic situation in Europe and the downturn in commodity prices are affecting people's confidence so there is still a lot of caution in the rural real estate market,” Milne says.
Real Estate Institute of New Zealand figures show a 20.8% increase in sales of lifestyle blocks in the three months to May 2012 compared to a year earlier and sales are up 8.6% from the three months to April 2012.
A majority of First National rural survey respondents across the country confirm this improving trend. The survey considers listing levels, sales, market trends and overall activity across First National's nationwide network of rural realtors.
“The early part of the year was subdued but this month has been flat out with offers and activity and people are now talking more positively about taking action,” says First National Otaki Principal Grant Robertson, the winner of the rural office of the year in the group's recent annual awards.
“The source of the activity is properties selling in the lower price range. First-home buyers and people under the $400,000-mark are purchasing in the city and that is flowing on to the lifestyle market,” he says.
“Buyer enthusiasm is increasing and vendor realism is leading to transactions being done.
“Vendors who are pricing their properties correctly at the time of listing are having success as too are people who have adjusted their asking price downwards after trying to sell at too high a price for the last couple of years,” Robertson says.
People are still cautious about employment amidst the atmosphere of public sector cuts in Wellington and worry about the impact the European economic woes will have on New Zealand, but if their property in Wellington is selling they are freeing up capital to achieve their lifestyle dream, he says.
The REINZ reports 10 regions recorded increases in sales compared with April while four recorded falls and the national median price for lifestyle blocks rose $15,000 to $475,000 for the three months to May.
Vendors' attitudes have changed and they now realise they are not immune to the property price correction, he says.
Lifestyle properties in
“But when people are both selling and purchasing in the current market, they are realistic about the differences from a few years ago,” Fyfe says.
He believes buyers are concerned about missing the bottom of the market and with the prospect of interest rates remaining low for a sustained period, they are presently more active.
While recently a few sales have gone through around the million-dollar-mark, and there are plenty of lifestyle properties in the $550,000 to $700,000 bracket available, there's a shortage of lifestyle listings in the $300,000 to $450,000 level, Fyfe says.
The dominant viticulture industry in Marlborough has seen vineyard and land development values halve since the 2008 harvest and even some forced sales, but the market for vineyards is now noticeably more bouyant.
“Demand for wine is exceeding supply and this looks set to continue,” Fyfe says. “Pricing for the fruit is still lagging behind this demand, but expectations for improved returns are positive and the harvest restrictions have been relaxed.”
A different rural picture is obvious in the Kaipara area, where First National Roper and Jones Director John Powell reports few listings or sales.
“It is shocking in the Kaipara region at the moment with few beef and mutton property sales and minimal dairy farms changing hands,” Powell says.
“Beef and mutton properties are not popular or regarded as financially viable and the dairy payout decrease for the coming season and uncertainty in
Nonetheless, REINZ data shows there were more farm sales in the three months ended May 2012 compared with the three months to April and also a year earlier.
The median price per hectare for all farms sold in the three months to May 2012 was 0.9% lower than a year earlier and a decrease of 8.5% from the three months to April 2012, the REINZ says.
For more information please contact:
Grant Robertson, 021 660 113
Ian Fyfe, 021 860 690
John Powell, 021 439 555
Colleen Milne, 029 771 0750 (not available June 17-24)
Compiled by Convergence Communications, 03 365 0081June 15, 2012