Marlborough vineyards growing in value

Highfield Estate winery in the Wairau Valley. Vineyards values in Marlborough have risen sharply.

Vineyard values in Marlborough are outstripping other regions in New Zealand, according to a special 2016 overview by Colliers International.

In the past year, values across Marlborough's approximately 23,000ha of developed vineyards have risen sharply while other regions have remained relatively static. Activity in the Hawkes Bay and Gisborne has been earmarked by older vines being replanted or replaced by alternative land uses.

Tim Gifford, an associate director in Colliers Rural & Agribusiness team, says there is still a strong market preference for Marlborough sauvignon blanc, with export markets showing good growth.

"Market activity is very strong at present as wine companies look to secure future supply and investors are attracted to the potential returns available either through operating or leasing vineyards. We are seeing an increase in vineyard development of bare land. In contrast to the speculative development of the mid to late 2000s, the development currently being carried out is largely by existing wine companies to meet existing and future demand.

"These buyers prefer larger blocks with a low proportion of non-productive assets, although we are now also seeing smaller lifestyle type vineyards selling very well. Due to the good returns generated over the past three years, there is a lack of listings available for sales. This has led to a supply/demand imbalance and driven values upward."

Looking to 2017, Gifford expects a static grape price combined with a return to long term average yields, which will see returns being down on the past year. However, he predicts the strong demand for Marlborough vineyards will continue.

Current vineyard values per hectare are:

• Within the prime growing areas of Rapaura and the Lower Wairau, vineyard values range from $175,000-$250,000.

• Mid-tier productive blocks within the Wairau and Southern Valleys have been achieving $150,000-$200,000.

• Awatere and Upper Wairau range from $100,000-$150,000.

Gifford cites the main factors that influence productive capabilities of each vineyard (and therefore values), are soils, the contour of the land, climate and irrigation. Throughout Marlborough, long term average yields can range between 6-16 tonnes per hectare, depending on growing conditions and variety.

"Vineyard values are closely related to the contract grape price paid to growers, which is currently between $1800-$2000 per tonne for Marlborough sauvignon blanc. The grape price has risen by around $400 per tonne over the past four years, however, we expect this to remain static for the coming year as a result of a large 2016 crop. Most wineries are operating at near capacity and have increased stocks of wine to be sold in the coming year."