Valuer makes sure the price is right

Deciding the value of rural land requires a lot of considerations for Henry Waller, one of three rural valuation experts in Northland.

He works for TelferYoung from CBRE, which is now part of the world's largest real estate company, listed on the New York Stock Exchange.

Based in Whangarei, Waller travels widely around the region valuing a large variety of rural properties.

Waller was brought up on a 420ha cropping and beef finishing farm at South Head on the Kaipara Harbour.

He completed his degree in rural valuation at Lincoln University before heading off to pursue his career. He's been working for TelferYoung since 2018.

Waller said Northland property provided him with a lot of challenges, with a "massively wide variety of soil types, contours, land uses, and locations".

"It's not as straight-forward as valuing flat dairy farms in the Waikato or Canterbury, where the comparable sales evidence is nearly identical to the subject property.

"Northland also has a wide variety of land uses, including avocados, kiwifruit, dairying, blueberries, sheep and beef and finishing blocks.

"To value these, I need to understand how each of these industries work and the current trends," he said.

TelferYoung from CBRE director Craig Russell said Waller had been involved in many large-scale rural property valuations, advising clients for various purposes including mortgage lending, compensation, GST and tax purposes as well as sales and purchases.

The company had invested heavily in professional reporting software, helping him to create well-researched, detailed analyses and comprehensive reports, leading the market nationally.

The three district councils have different rules, so Waller said a vital part of his job was to keep up to date with these as they change regularly.

Valuers use sales to derive comparisons to the property they are valuing, but in the rural market, sales evidence is scarce in comparison to valuing residential property where there may be several comparable sales within a kilometre radius. Therefore an understanding of the market and what is driving value of rural property is essential.

"It's not like there are a lot of sales in surrounding roads. Comparable rural sales might be anywhere in Northland and therefore adjustments need to be made from the sales to the subject in relation to the property's highest and best use, which is derived from its soil types, contours, presentation, level of improvements and location," he said.

"Sales are sometimes few and far between," he said.

Waller said much of his work was involved with deriving market values for mortgage lending, where farmers needed to provide banks with details of equity to raise funds for business expansion.

Occasionally families needed valuations for estate planning and family successions where owners needed to know values so their assets could be fairly distributed to their descendants.

"Sometimes clients might want a value to be high and others might want it to be low but, ultimately, it's the market that decides and I have to remain impartial and independent," Waller said.

In his reports, Waller considered the highest and best land use of the property through its location, soils, contours and land use. A full market valuation report would include a description of the property, title information, location, land comments, market commentary, sales discussion and valuation calculations.

In recent years, land use has been changing.

"Historically the land might have been used for sheep and beef, but now forestry is really setting the price for this land. Alternatively, we have seen the same with avocado and kiwifruit developments in all three districts, which has also driven values for land suitable for conversion.

"Land considered suitable for forestry has appreciated considerably in recent years. Grazing properties with moderate to steep land within about 180km of the port is now highly sought after. It makes it very difficult for farmers to compete," Waller said.

Waller said there was now a domino effect, where farmers were reconsidering their steep hill country.

"If they can sell some of this off at a high price to forestry, they can then afford to go and buy some better contoured finishing land in generally superior locations."

Under current rules, land use capability class 4 to 7 land is eligible to be sold for forestry.

"Seven is very steep, pretty much a cliff," Waller said.

According to Real Estate Institute of New Zealand figures, in the past three months there have been good sales of grazing properties throughout Northland, albeit mainly in the lower price range, light activity on finishing properties and no dairy farm sales.

Brian Peacocke, Rural Spokesman for REINZ said overall there had been a marked decrease in sales between June and August, reflecting caution in the current political climate, inexorable increases in costs across the board and widespread volatility in climatic conditions, including in the Far North.

"While it appears good levels of income are likely to continue in much of the agricultural sector this season, reports of decreasing levels of production from a national perspective combined with the aggressive increases in costs will have a balancing effect," Peacocke said.

The high demand for coastal land was a consistent driving force, with people keen to leave urban areas after the Covid-19 lockdowns and having a dream of a rural lifestyle and working from home.

"Anyone with even distant coastal views has valuable land that might be better being cut off and made into a lifestyle block. The Whangarei District Council allows some land to be put into an additional title if other bush land on the property is put into a covenant to protect it.

"Farmers with some unproductive land in a corner might be better to sell it off as a lifestyle block to raise funds for the business. This type of land can have a substantial value and there are a lot of scenarios around that," Waller said.

Healthy commodity prices were currently offsetting rising farm costs.

"Farm expenses are increasing across the board, with fertiliser prices particularly crazy, and anyone with a mortgage faces pressure with interest rates going up.

"For many farmers and rural landowners, the future will be about optimising land use."