Rural property prices have peaked

By Phil Boeyen, ShareChat Business News Editor

Wednesday 9th January 2002

The strong growth in rural land prices over the past couple of years is likely to slow in 2002 according to the New Zealand Property Institute.

CEO, Conor English, says over the last two years New Zealand has seen a substantial re-rating of rural property with land prices in some areas doubling.

"With high farm incomes due to high commodity prices and a low dollar, low interest rates, and no major drought, land values have surged.

"However there are now a number of factors which suggest that this market has peaked and land value growth may slow."

Mr English says increases in farmers' incomes look less likely, with international commodity prices coming off historic highs.

"Fonterra has already advised dairy farmers to be careful with their money and indicated that payouts will be down next season."

"We will also start to see more impact of the unbundling of dairy assets as the new Fonterra share structure gets established and becomes understood. This is likely to see a reduction in the premiums paid for land suitable for dairy conversions, and the flow on effect that this has had."

Rural property is estimated to represent around $85 billion of New Zealand's $420 billion property asset.

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