Quiet Period For Rural Market

News Release

15 September 2009

Quiet Period For Rural Market

Calving and coming out of the wintering period have contributed to a seasonally quiet period for the rural real estate sector as reflected by figures released today by the Real Estate Institute of New Zealand (REINZ).

REINZ National Councillor and rural spokesperson Peter McDonald says while the three month period (May to July) prior to the August figures reported today showed good activity, especially in the dairy sector, there were no dairy sales at all during the month of August.

“This in itself is not of concern,” Mr McDonald says. “We expect August / September to be slow. With the good prices at the last two Fonterra powder auctions, raising prices by 50 percent over the past three months, and with Fonterra hedging against the impact of the high dollar, there’s a quiet feeling of confidence returning to the dairy industry.

“As a result of this, we would expect to see some action by October / November, with farms coming on the market and people registering their interest with agencies.”

The fact the season ended with the average national price of $44 per kilogram of milk solids and more than $32,000 per hectare was a good result that has set the scene for a good quarter ahead, Mr McDonald says.

However, Mr McDonald believes the rural market is as much driven by banking policy as it is by payouts.

“Banks have a strong hand to play in the rural market. I hope we will see a little more thought go into bank lending with a greater emphasis put on good budgets rather than on equity.”

The ongoing good news in the rural real estate sector has been that of lifestyle properties.

“Lifestyle properties have held their value right through the downturn of the past couple of years right across the country,” Mr McDonald says.

The national median price for lifestyle properties in the three months to August 2009 is $430,000, exactly the same as the corresponding period in 2007 and up by $10,000 on the three months to July 2009.

The total number of lifestyle property sales has dropped slightly in the three months to August 2009 to 1342 from 1393 in the three months to July 2009. However, this is well up of on the 1050 lifestyle properties sold in the three months to August 2008.

The median price for farms nationwide has also dropped slightly in the three months to August 2009 at $1,000,000 compared with $1,200,000 in the three months to July 2009, although it has risen in five out of 14 regions: Auckland, Gisborne, Hawkes Bay, Manawatu / Wanganui and Otago. Prices have remained the same in Canterbury.

In terms of turnover, there were 183 farm sales nationally in the three months to August 2009 compared with 229 in the three months to July 2009 and 516 in the three months to August 2008. The biggest number of sales were grazing properties with 99 properties changing hands in the three months to August 2009 compared with 108 in the three months to July 2009. This is still considerably lower than the 261 grazing farms that sold in the corresponding period in August 2008.

Regionally, the most activity in the rural real estate sector was centred on Canterbury where 27 farms sold in the three months to August 2009 and Northland where there were 24 sales in the same period. Bay of Plenty recorded 22 sales.

“The August figures are not the best we have seen, but there is a definite air of optimism in the sector with interest rates stabilising and good sales recorded by Fonterra,” Mr McDonald says.

ENDS

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