The Colliers Rural & Agribusiness Valuation & Advisory team have released their Marlborough Viticulture Sector Report, which shows there is a strong upward trend in vineyard values in the region during the past year.
The report, compiled by viticulture valuation experts Tim Gifford and Jack Powell, notes that continued international demand for Marlborough sauvignon blanc has resulted in the further expansion of plantings within the district and an active property market.
Analysis shows that higher-than-average Marlborough vineyard sales in 2022 were dominated by small-to-medium scale blocks with strong demand driven by existing wine companies and the lifestyle market.
Powell, Rural Valuer at Colliers, says the number of transactions is often a good indication of market sentiment and indicates strong demand across the lifestyle and productive vineyard market during the past year.
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“The average vineyard sale price per hectare has increased across Marlborough based on the properties that have transacted.”
The 2023 harvest is currently in full swing in Marlborough where yields are reported to be above average overall but are likely to be below the recorded 2022 harvest.
The wetter-than-average summer has delayed ripening and increased disease pressure, and the weather across the next few weeks will be crucial in determining the final quantity and quality of this season's crop.
Contract grape prices have increased in recent years with the average price paid per tonne for Marlborough sauvignon blanc grapes increasing by around $250 per tonne or 12.5 per cent last year, according to statistics produced by New Zealand Winegrowers.
This has resulted in favourable returns to growers, although this has been tempered by industry issues, including labour shortages, and increased operating expenses.
Recent sales have reached in excess of $400,000 per planted hectare for smaller, well-located vineyards with strong production history on quality soils.
Gifford, Director of Rural Valuation at Colliers, says there’s a number of key drivers that impact the value of vineyards.
"The main factors influencing vineyard values are the location and crop performance, with productive sauvignon blanc blocks with a history of high yields being favoured in the market,” Gifford says.
“Properties that are more vulnerable to flooding or other extreme weather events will have greater crop growing risks, which will be reflected in the vineyard value.
“The age of vines and upcoming redevelopment costs are often not accurately reflected in the price paid for vineyards, particularly when demand is strong and underlying land values are increasing.”
Gifford says as an asset class the rate of return on vineyard investment has reduced significantly over the past five years, and currently sits around 5 to 7 per cent of vineyard value.
“This is due to strong capital appreciation in recent years, comparative investment returns, low interest rates, and the market’s view on vineyard investment risks.”
The report also indicates that looking ahead, constrained land supply may impact further expansion of vineyard developments within Marlborough.
This could lead to the development of areas that have previously been deemed unsuitable for grapes and drive further demand for existing vineyards placed on the market, with competition between wine companies looking to expand that will drive prices upward.
- Article supplied by Colliers
