Uncertainty has been a popular word recently. Uncertainty is why people have been slower to buy property. Uncertainty is why people have not wanted to commit to borrowing more money. Uncertainty is why many people have decided to sit back and see how the market plays out before making investment decisions.
The current economic landscape, property prices adjusting and interest rates constantly rising has created a notable shift in the property market. We have noticed this a lot in the rural and lifestyle property sectors in recent months.
Let’s look at what has changed during the past year.
Rural Property Market Overview
The rural property market has experienced a decline in sales activity, according to the Real Estate Institute of New Zealand (REINZ). In the three months ending March 2023, there were 182 fewer farm sales (a decrease of 44.2 percent) compared to the same period in 2022. This decline suggests a cautious approach from farmers, likely due to economic uncertainties. Overall, there were 230 farm sales during this period, down from 412 sales in the previous year.
The median price per hectare for all farms sold in the three months ending March 2023 was $28,520, reflecting a 5.1 percent decrease compared to March 2022. The REINZ All Farm Price Index, which accounts for variations in farm size, location, and farming type, decreased by 1.7 percent during the same period. While no regions recorded an increase in farm sales, Wellington and Auckland experienced relatively smaller declines, while Taranaki and Southland faced the largest decreases.
Specific Farm Types
Dairy Farms
The median sales price per hectare for dairy farms was $39,620 in the three months ending March 2023, representing a 4.6 percent increase compared to the previous year. The median dairy
farm size during this period was 138 hectares. On a price per kilo of milk solids basis, the median sales price was $37.13 per kg of milk solids, showing a slight decrease compared to previous periods.
Finishing Farms
The median sales price per hectare for finishing farms was $37,375 in the three months ending March 2023, reflecting a 12.5 percent increase over the past 12 months. The median finishing farm size during this period was 37 hectares.
Grazing Farms
The median sales price per hectare for grazing farms was $12,350 in the three months ending March 2023, experiencing a decrease of 10.7 percent over the past 12 months. The median grazing farm size during this period was 170 hectares.
Horticulture Farms
The median sales price per hectare for horticulture farms was $367,340 in the three months ending March 2023, representing a significant decrease of 33.5 percent over the past year. The median horticulture farm size during this period was 5 hectares.
Lifestyle Property Market Overview
The lifestyle property market has also witnessed changes in sales activity and median prices. In the three months ending March 2023, there were 93 more lifestyle property sales (an increase of 8.9 percent) compared to the previous three months. However, when compared to the same period in 2022, there was a significant decline of 32.6 percent in sales.
The median price for all lifestyle properties sold in the three months ending March 2023 was $970,000, representing a 6.5 percent decrease from March 2022. Like the rural property market, the lifestyle property market also experienced regional variations in sales activity.
Regional Variations in the Lifestyle Property Market
Auckland
In the three months ending March 2023, Auckland experienced a 2.2 percent increase in lifestyle property sales compared to the same period in the previous year. The median price for lifestyle properties in Auckland was $1,730,000, representing a 2.8 percent decrease from March 2022.
Wellington
Wellington saw a substantial decrease of 46.8 percent in lifestyle property sales compared to the same period last year. The median price for lifestyle properties in Wellington was $1,065,000, reflecting a 2.7 percent decrease from March 2022.
Canterbury
Canterbury witnessed a decline of 15.5 percent in lifestyle property sales compared to the previous year. The median price for lifestyle properties in Canterbury was $790,000, indicating a 3.7 percent decrease from March 2022.
Waikato
Waikato experienced a significant decrease of 38.5 percent in lifestyle property sales compared to the same period in the previous year. The median price for lifestyle properties in Waikato was $900,000, showing a 5.3 percent decrease from March 2022.
Impact of Changing Interest Rates
The potential impact of changing interest rates on the rural and lifestyle property market should not be overlooked. Economist Tony Alexander suggests a high probability of an early cut in interest rates. Lower interest rates make borrowing more affordable, which can influence buyer behaviour and potentially drive-up property prices.
Alexander believes we can say with confidence that we are now at the bottom of the house price cycle.
“What's likely to start happening now is the two year queue of people who have held off buying a property is likely to start stepping forward,” he said.
However, it's important to note that the overall impact of interest rate changes on the property market is complex and can vary based on other factors such as economic conditions, market sentiment, and government policies. After all, it is an election year.
A Year in Review
The rural and lifestyle property market has experienced fluctuations in sales activity and median prices. Economic headwinds and cautious behaviour from farmers have contributed to a decline in rural property sales. On the other hand, the lifestyle property market has seen regional variations, with some areas experiencing declines while others maintain stability.
The impact of changing interest rates remains a key factor to watch in the coming months. If interest rates are lowered as anticipated, it may provide a path for increased buyer activity and potentially drive-up property prices.
As the market continues to evolve, it's essential for buyers, sellers, and investors to stay informed and consult with industry professionals for the most up-to-date insights and guidance.
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