Seven OIO decisions to convert hill country to forestry in February alone

Pasture to production forestry sales are back on the table for foreign investment in 2024 as the Overseas Investment Office clarifies its policy position on the benefit to NZ test, says Property Brokers General Manager - Rural, Conrad Wilkshire.

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Conrad reflects that dairy farm sales have halved in total value of sales to $700m for 2023, with 130 sales, in comparison to 235 sales in 2022. The dairy median price for 2023 is $39,00/ha but reflects a clearance of Tier 1 dairy farms with Tier 2 & 3 properties in less favoured locations yet to gain traction in the market. 

Sheep and Beef sales that are 200 ha or more in size reflect a similar theme, with 105 sales in 2023 nationally for a median close to $12,000/ha.

New Zealand Sheep & Beef Farm Sales Last 10 Years 1 January 2013 – 31 December 2023 (200ha+) Source REINZ

“This is well back as we didn’t see in the high-value sales of pasture to forestry in the results, but this could be changing,” says Conrad.

In February seven decisions were granted by the Overseas Investment Office (OIO) to convert pastoral-based hill country to production forestry. All large-scale properties, typically LUC 6, 7 and 8, at significant sale prices. These results are yet to all flow through into confirmed sales in the statistics.

Conrad says this is significant news.

“This is the most significant tranche of OIO decision results since September-October 2023 which, at the time, reflected a deferred pipeline for most of the last calendar year. 

“There is a real risk in relying on these OIO decisions in support of a current valuation or appraisal, given that Land Use Classifications have a considerable influence on the decision outcomes and independent regional government policy settings are likely to be a factor, too.”

Conrad projects that the business of farming will continue to drive market activity and the reality of high interest rates and a challenging commodity cycle is expected to be a dominant theme for calendar year 2024.

Rural sales in New Zealand are at their lowest levels in a decade, by both number of sales and value attributed to these sales, recent annual 2023 REINZ statistics show. 

There were 843 sales (of land 20 hectares or more) for a total of $2.4 billion in the 2023 calendar year.

The median price is still holding up at $27,200/ha, which is similar to levels pre the 11 consecutive increases in the OCR.

“There are signals of moderate relief in interest rates expected later this year. But, realistically unless there is a correction in this national median back to levels seen five years ago of $22,000/ha it is hard to see the market recovering to $3 billion plus in sales anytime soon,” states Conrad Wilkshire, General Manager – Rural for Property Brokers.

New Zealand Rural Sales Last 10 Years 1 January 2013 – 31 December 2023 (20ha+) Source REINZ