Compiled by its Insights & Data team, the report also said there has been noticeable growth in buyers driven by a change in lifestyle, attracted by the ability to outsource part or all of a horticultural operation enabling a reasonably passive income stream.
Nick Hawken, Bayleys’ national director rural said REINZ data showed 2,585 hectares of horticultural land was sold in the 2021/2022 financial year, with a broad spread of values ranging from an average of $178,000 - $727,000 per hectare.
“An analysis of Bayleys’ transactional data shows a significant lift in cross-sector buyers in the chase for returns.
“A distinct two-tier market has emerged, with syndicates and corporates willing to pay for scale and focusing on larger production blocks generally above six canopy hectares, and creating a value gap relative to those smaller blocks.
“Meanwhile, heavyweight grower, distributor, marketer, and exporter of fresh produce T&G Global, has sold two orchards and a post-harvest facility to New Zealand Superannuation Fund’s rural investment manager, FarmRight which further shows the wide range and depth of investor interest in the horticultural property sector.”
Hawken said like the dairy sector, investment entities are scoping out horticulture property opportunities that can leverage off “the New Zealand Inc.” narrative and the relatively systemised nature of investment in the two sectors.
“High-performance agriculture and horticultural assets that play into the hands of rising global consumer demand and preferences for New Zealand produce are realising a premium in the current market.
“It’s a story of returns, with growth being seen across the primary horticultural sectors but with kiwifruit the hero.
“Thanks to strong market returns, and possibly to a certain extent license scarcity, kiwifruit orchards dominate the horticultural property picture with established G3 Sungold orchards selling for $2.0 million per canopy hectare.”
Hawken said the scarcity of coveted G3 Sungold licences, the restriction of total hectares an individual can retain, and record tender prices for new licenses, are in essence designed to help protect orchard gate returns (OGR) in the longer term.
“Whether we’ve seen the peak for kiwifruit prices or if the strong run continues, remains to be seen.
“Higher operational costs, labour challenges and growing inflationary pressure all need to be considered here, however returns for varieties like Hayward Green and the new Ruby Red are expected to benefit from the market access created by G3 SunGold expansion.”
Other segments of the horticulture sector – like apples – have seen the pandemic’s long tail continuing to disrupt some markets and supply chains, while rising on-orchard costs, a tight labour market and adverse weather events are squeezing orchard gate returns.
“Representative organisation for the New Zealand pipfruit industry, NZ Apples & Pears Inc. reports that the recently completed apple harvest is likely to be down more than a previous estimate of 12 percent with staff shortages at harvest time and adverse weather events all taking their toll, “ said Hawken.
“Likewise, suppressed OGR for avocados in recent seasons demonstrates the cyclical nature of commodities, but the improved return forecast for the coming season suggests recovery is likely.
“Looking ahead, New Zealand’s free trade agreement negotiations with the European Union are expected to benefit horticulture – particularly kiwifruit, onions, and apples – as tariff-free conditions are put in place.”
Hawken said there will be opportunity across the wider horticulture sector to springboard off the confidence being shown globally for New Zealand produce and off strong domestic demand for fresh fruit and vegetables.
“Turners and Growers (T&G) have identified berries and table grapes as two emerging produce categories and I am certain other segments of the market are ripe for further exploration.
“And as with other primary sectors where carbon-related compliance is showing its hand, T&G recently signed the country’s first Sustainability-Linked Loan in the horticulture sector, committing to ambitious targets to decarbonise its business.
“This points to opportunity for other horticultural landholders to reposition their operations in a changing world, and to evolve their sustainability models in line with bank lenders’ expectations for target-driven objectives when considering loans.”
For Bayleys full rural insight horticulture market sector report see bayleys.co.nz/insightsanddata/rural