Increases have been triggered by larger wineries looking to secure supply for their marketing programmes, property consultant Colliers says in a research report.
The outlook will be of more concern if vineyard costs keep increasing without any upward movement in grape prices and vineyard productivity.
A number of growers are already concerned about static prices, which mean increasing grape yields is the only way to maintain or improve returns, Colliers’ Blenheim valuer Tim Gifford said.
Colliers expects grape prices to remain about current levels over the next harvest season with volumes expected to be about 6% higher as new plantings come into production and yields remain at long-term average levels.
Despite the issues the underlying industry is strong.
Value growth has been constant over the last six years as processing capacity increased, export sales strengthened and the contract grape price lifted but had plateaued in the last six months or so.
Tighter Overseas Investment Office rules are likely to affect multi-national company involvement in greenfield developments.
For further vineyard value increases grape prices will need to rise further and productivity improvements will be needed through canopy and disease management.
Average grower returns in Marlborough increased about 40% since 2012 through higher grape prices and favourable growing conditions but vineyard operating expenses have also increased at an equal pace.
As an alternative to immediate sale, leasing will continue to be a good option to provide ongoing returns and eventual capital appreciation and is increasingly part of succession planning for many vineyard owners.
However, as vineyard values increased rental levels have reached a point where it might not be economically viable for lessees, mainly wine companies. That might create issues for future rent review negotiations, particularly in higher-value localities, Gifford said.
Among sales he highlighted was the $31.5 million paid by the New Zealand Super Fund in November 2017 for Altimarloch Vineyard, a 319ha property in Awatere Valley, with about 200ha mainly in sauvignon blanc and a small area of remaining plantable land.
About the same time a Marlborough wine company paid $19m for St Lukes Vineyard at Seddon, a 365ha property with 130ha planted.
They were the headline price-toppers but both were at the lower end in terms of price per planted hectare, at $150,205/ha and $125,615/ha respectively, with smaller vineyards the most expensive.
The highest price per hectare was the $3.3m paid for 9.47ha at 57 Selmes Rd in the highly-regarded Rapaura area, with 7.6ha in sauvignon blanc, planted in 2015-16. The price worked out at $294,343/ha, just heading off the $292,381/ha paid for a Grovetown vineyard with 6.75ha in sauvignon blanc. The Grovetown site in the favoured Rapaura/Lower Wairau area has heavy, productive soil and low climatic risk, Gifford said.
Two properties in Jones Rd, in the same area, also sold strongly in February and March last year. One was 7.5ha of planted vines at $2.36m ($279,625/ha) and the other having 25.7ha of grapes for $7.52m ($261,766/ha). The latter sale appeared to involve two adjoining properties, Gifford said.
He reported about 14 vineyard sales over the year, down from about 25 sales in recent years but still well above previous lows in the 2008-11 period.
The lower turnover indicates there might be a disparity between vendor and buyer price expectations.
There were extended sales periods for smaller and higher-valued vineyards though premiums were still be paid for strategic sites in prime locations.
The two big vineyards with the highest sales prices are in the Awatere Valley and Seddon areas where the per-hectare prices are typically lower and offer slightly better investment returns.
Marlborough is the centre of wine production in NZ, providing about 68% of total vineyard land and 77% of production. Nearly 80% of Marlborough plantings are sauvignon blanc.
The 26,000ha production area is nearing a peak with the Ministry for Primary Industries estimating a potential 5000ha of land available for planting in the next five years.
That will drive further wine export growth but with irrigation water already over-allocated in many areas the industry might eventually need to rely on other regions and other grape varieties for further growth, Gifford said.
Pinot Noir, chardonnay, and pinot gris are also grown.
He identified three production zones in Marlborough – the premier one being Rapaura/Lower Wairau, close to and north of Blenheim, with typical vineyard values of $250,000 to $300,000/ha and west of there the Wairau and southern valleys fetch $175,000 to $250,000/ha. The third zone covers the Awatere (Seddon) and Upper Wairau areas, fetching $125,000 to $185,000/ha.
About 20% of NZ wine is sold domestically and small wineries with less than $1.5m in sales rely on that market, including tourists, for most of their sales.
Export markets are strong, led by North America, Britain and Australia. In those markets Marlborough is positioned as high-quality, proprietary-branded wine.
