Rural property on the move

New Zealand’s rural property market is gaining momentum although highly price sensitive, according to First National Group’s latest real estate agent survey.

The survey of rural realtors in the nationwide network’s almost 70 offices covers the six months of December 2010 to May 2011

First National Group general manager John Stewart says the outlook is quietly positive, driven largely by bank lending, lower interest rates and higher commodity prices,

“There’s no doubt that a quiet lift has been occurring for some time, up to four months in fact, in both enquiry and sales of rural properties across much of the country, on the back of increased world market prices for wool, meat, grain and dairy products.

Sales volume for summer/autumn was double that of spring/summer, although hard won. Listings were down on the same time last year.

“The market is very price sensitive with 65% of respondents reporting continuation of a ‘buyers market’,” Stewart said.

“Dairy and forestry appear to be in healthy demand but our salespeople believe even these sector prices are stable rather than on the increase.

“Across the country though, many vendors are holding onto history-based higher prices and these properties remain stagnant often while those based on current expectations are attracting offers,” Stewart said.

“Interestingly, Taranaki and Central Otago seem the most vigorous with our Taranaki team commenting that the rural market is turning a corner there after several tough years.

“In Central Otago vendors seem to be adjusting prices resulting in immediate market approval. It is of interest that this market was the first in the country to adjust section and home prices back in 2009 with similar reaction.”

Survey results summary:

Prices

• Over 70% of realtors advised serious sellers to reduce pricing to be comparative with sold properties. Fourteen percent advised sellers to wait if they wanted to get their price and 5% advised property presentation was a key factor in selling in this market. Ten percent (all of which in areas of high dairy and forestry demand) said prices were about right and sellers should expect increased buyer enquiry in spring.

Lenders

• BNZ has extended its lead as main rural lender to 35% (from 28% six months ago). It was followed by National Bank (22%), Rabobank (17%), Westpac (13), no standout (9%) and ASB on 4%.

Regional variation and key factors influencing markets

• Northland - Few listings and fewer sales in Northland. Vendors reluctant to list due to low offers, potential buyers busy repaying debt.
• Auckland - Quiet but First National mainly sells lifestyle there and key factors here are fuel prices and land prices too high.
• Waikato - Healthy supply, demand and sales although some prices still too high.
• Bay of Plenty - Still reeling from horticultural slump and PSA. Little demand for higher end properties but some demand for lower end and there are some bargains to be had particularly in Te Puke.
• Taranaki - Rural has turned a corner. Prices holding well, good sales and more listings expected in spring as demand is strong.
• Lower North Island – Sales better than expected. Increased demand for bareland blocks for building.
• Upper South Island - Quiet mainly due to limited supply, debt repayment and high fuel prices.
• Canterbury – Current commodity prices are fueling demand for good farms. However with vendors’ expectations high, fewer were listing, preferring to make money from their operation themselves. Buyer demand is tipped to further increase in Spring.
• Central Otago - Vendors more motivated, reduced prices stimulating interest from buyers although sales slow. Positive outlook for spring.
• No data for Dunedin region or Southland.

Sales – Sales in the summer/autumn period were double the spring/summer sales period.

Lifestyle - Supply exceeds demand in all areas measured. Key factors were high fuel prices and price expectations. There was some interest in cheaper lifestyle, smaller blocks (1 – 3 acres) and bare land but overall this market is yet to take off again.