The Real Estate Institute said yesterday the median price of forestry farms had increased by 45% over the last year, from $6487/ha to $9394/ha.
Institute chief executive Bindi Norwell said yesterday: “This increase may be largely the result of the Government incentives to plant trees, making forestry land more desirable and leading to increased sales of sheep & beef farms. Interestingly, the North Island is seeing a greater impact on forestry prices than the South Island.”
Ms Norwell said the North Island median was up 95%, but in the South Island it had fallen 4%.
She said the rural community had been saying for a few months that the Government’s incentives towards planting trees were favouring forestry sales and leading to increasing sales of beef & sheep farms: “With the price of forestry farms across New Zealand increasing by 45% when compared to the same time last year, the data tends to suggest that the rural community is correct in its assertions. The incentives may also be the reason for a reduction in farm sales.”
Forestry farm sales, year to April (2018 in brackets):
NZ: 50 (70), down 29%
North Island: 219 (39), down 26%
South Island: 21 (31), down 32%
Median prices, year to April (2018 in brackets):
NZ: $9394 ($6487), up 45%
North Island: $13,128 ($6656), up 97%
South Island: $6162 ($6450), down 4%
Ms Norwell argued that, as the value rose, investors were holding on to their farms, hence the fall in sales & further value rise.
But she took this another step: “Feedback from farmers & rural salespeople around the country is increasingly one of concern, with many saying that once beef or sheep farms have been converted to forestry, they will never be converted back again because of the loss of infrastructure and the high barrier to entry should re-conversion be considered in the future.”
That claim ignores the conversion of forest land in periods when dairying became far more profitable.
Ms Norwell suggested that changes in incentives for foreign investors could also be affecting the market: “Incentives towards forestry assets were introduced in October 2018 and changes to the Overseas Investment Act that now prevent foreigners (with the exception of Australians & Singaporeans) from buying existing residential or lifestyle properties means that it may now be easier for foreigners to invest in forestry.”
Attribution: Institute release.