In 2010 prices for Hawke’s Bay lifestyle property have stabilized to a large degree, although this is a generalized statement and different categories of lifestyle property have been affected in different degrees.  The rural category most affected has been lifestyle building sections or property i.e. bare land property for which values have fallen quite dramatically in comparison to rural lifestyle property with homes. To some extend this situation may reflect an oversupply fuelled by numerous rural lifestyle subdivisions initiated in the “boom” years. Another undoubtedly is the cost of building rural homes together with the current cautious attitude of New Zealand bank managers compared to a few years ago.

By comparison farm prices have been relatively stable although the number of sales has been too few to assess any meaningful trends. It is interesting to compare the relatively resilient 3 year median price trend for farms to lifestyle property which are down in value by nearly 20% (source Real Estate Institute of New Zealand)..

Median Sales, Hawke’s Bay, Farms – 3 year comparison.

April 2008         $1,550,000

April 2009         $1,332,500

April 2010         $1,410,000

Median Sales, Hawke’s Bay, Lifestyle propery – 3 year comparison.

April 2008         $500,000

April 2009         $415,000

April 2010         $410,000

A 450 hectare farm which had a 5000 winter su capacity was sold in 1997 for $750,000; which is the equivalent of $150 per su. If the same farm resold for its 2005 market value of $4,000,000, that price would equate to $800 paid for each per stock unit carried. An obvious conclusion is that for a farm purchase to be economically viable at that price level, commodity prices would need to be maintained in real terms at 2005 levels for many more years. history relates however, that in 2006 lamb prices to farmers dropped considerably.

While it is a useful basis to compare the winter carrying capacity of different pastoral properties relative to their cost price, this is not the only factor needing consideration when purchasing a property. Overall farm productivity needs to be appraised, taking into account every aspect affecting productivity through a 12 month season. Important factors include terrain, soils, internal subdivision, pasture development, water reliability (and quality) and very importantly; the effect of local climate on the annual farm pasture growth pattern. These factors determine the ability of farmers to finish (or fatten) livestock from early summer through to autumn and to buy in or trade additional livestock over this period, with obvious effect on overall farm profitability.

Although the orchards and vineyard industries share with the pastoral industry the price highs and lows dictated by export commodity markets; vineyard and horticultural property prices are as much affected by localized climatic risk factors as their productivity. This is a basic point of difference when considering vineyard and orchard property values. These industries are rightly considered as relatively high in risk, with frost, hail and wind regularly challenging growers – depending to a large degree on their locality. This risk factor is accentuated by the fact that most growers do not benefit from the diversified primary export markets enjoyed by pastoral farmers (wool, sheep meat and beef) and it is not uncommon for a grower to loose an entire year’s income from one climatic event.

The value of an individual property is to a large extent determined by soil type, tree varieties, ages, condition, water and infrastructure; all being the factors which influence both production levels and crop values. Irrespective of these factors however, all things being equal, an orchard located within the Heretaunga plains between Hastings City and the coast line of Hawkes Bay (as an obvious example) is likely to be significantly more valuable than a similar property on the west side of Hastings, where the risk of hail storms and acute late spring frost are significantly higher.

Hill country farmers in Hawkes Bay traditionally gear their farming operations around the possibility of a summer pasture growth deficit by being prepared, if necessary, to sell a proportion of their lambs or cattle as “store” stock i.e., sale for fattening on other properties, and by growing summer stock feed crops as part of a cycle of pasture renewal. The Hawkes Bay weather pattern is not considered an undue disadvantage by good farmers; who “farm to the climate” and enjoy mild winters and healthy livestock, benefiting from significantly lower levels of stock ailments and parasites which are more common in higher rainfall Districts.

Periodically however, more severe droughts occur. Severe summer droughts on their own are not likely to critically affect the viability of well managed farms, as was evidenced by a notable summer drought in 1998. Summer droughts followed by an autumn rainfall deficit (experienced in 2007) preventing adequate pasture renewal for winter are very much more serious for the farmer, often resulting in the necessity to sell capital breeding livestock in poor condition at low prices on a crowded livestock market. At the end of the drought period when pastures have recovered sufficiently, farmers then face the need to compete for the purchase of replacement breeding stock at inflated prices.

Extended summer to autumn droughts are fortunately uncommon, however were experienced over wide areas of Hawkes Bay in 1983, again in 1986 and most recently in 2007. The 1983 and 1986 droughts were considered a starting point, aggravated by low commodity prices, in significant and sustained falls in pastoral farm prices which were experienced through to 1997. In 2007, a normal mild summer drought was followed by an unprecedented, severe autumn drought, also at a time many farmers were struggling to cope with low lamb and wool prices. This has undoubtedly affecting pastoral farm real estate market in the present time.

Hawkes Bay has experienced nearly 20 years of generally favourable growing seasons, the extended nature of the 2007 summer – autumn drought was both a bad experience and wakeup call for a great many Hawkes Bay farmers. This was a season many younger farmers had not previously experienced and older farmers had forgottern about. Traditionally, prudent Hawkes Bay farmers include significant areas of summer feed crop within their annual pasture renewal program, as well as up to two years hay, bailage or silage made and stored. In good seasons this is used as suplimentary and fattening feed, but in times of shortage; to sustain capital livestock. The potential for drought in Hawkes Bay will always be present and no doubt, from time to time in the future, will again influence pastoral land prices.