NZ farm prices slump on Fonterra payout, lifestyle blocks resilient

Monday 13th July 2009

New Zealand farm prices have fallen by a quarter across the country in the last yearand taken an even heavier hammering in Southland where the dairy conversion boom has ground to a halt.

Rural lifestyle blocks, however, are continuing to sell, with sales volumes increasing over June 2008 figures, and the median price for lifestyle blocks falling a more modest 7.4% year to year. The Real Estate Institute of New Zealand statistics released today show dramatically fewer farm sales nationwide in June 2008, compared to a year earlier, and prices falling back to reflect dairying land values prevailing in 2007, before the recent spike in Fonterra payouts.

"We've known for many months the market couldn't sustain the euphoria created by the massive Fonterra payout of 2008 and prices have realistically settled back around 2007 figures," REINZ rural spokesman Peter McDonald says.

With the Fonterra payout acting as a "pretty good barometeter of where we can expect the rural real estate market to head," the 2010 season forecast forecast at a low $4.55 per kg of milksolids means farmland is returning to more sustainable values, he said.

The REINZ figures coincide with a Rabobank New Zealand survey of farmer sentiment, also published today, showing a further decline in confidence. Half of 450 farmers surveyed last month expect worse trading conditions in the year ahead. Net pessimism in April and November was 33% and 29% respectively.

Particularly hard-hit are farm sales in Southland and Taranaki, with a two-thirds drop in median price for June 2009 compared to a year earlier, at $528,500 ($1.5 million in June 2008).

In Southland, the median price for farms sold almost halved to $1.3 million, from $2.2 million in June 2008, on much smaller volumes - 21 farm sales last month compared with 113 in June 2008. The Rabobank survey found that dairy farmers were the most pessimistic group, with 57% expecting conditions to worsen, while just 12 percent of all farmers surveyed were optimistic about the future.

Sheep and beef farmers were not far behind, with a net 44% expecting the economy to worsen. Lifestyle block sales rose from 1177 to 1354 for the months of June 2008 and 2009 compared, with the median value of sales falling 7.4% to $421,250 last month, compared with a year earlier.

"Lifestyle property performance tends to correlate more closely with residential trneds," McDonald said. "Unlike farm prices, lifestyle prices didn't peak dramatically during 2008, but neither have they fallen significantly despite the general economic conditions."

Businesswire.co.nz

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