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Rural property values heading for correction

Rural property values heading for correction

Rural land values around New Zealand are heading for a correction but land is still a good investment, says First National Real Estate's leading rural valuer.

Errol Saunders, managing director of Ford Baker Valuation, addressed rural real estate agents at First National's annual South Island Rural Seminar in Christchurch yesterday, giving an overview of trends in values of dairy, arable and finishing properties.

Prices had stabilised and sales volumes had slowed dramatically over the past year, pointing to the likelihood of a downward correction over the next 12 months, Mr Saunders said.

He presented Real Estate Institute of New Zealand statistics that showed rural land values and volumes that suggest stabilising rural land values and reducing volumes.

Comparing the three months to September over three years showed the total number of farms sold in New Zealand went from 459 in 2006 to 557 in 2007 and down to 430 this year.

"The tide has turned and the time taken to sell farms is increasing," he said.

"We now have a low volume market. Buyers are just taking stock and hesitating. A rural contraction of 10% would not surprise me.

"A low volume market is not a bad thing because it takes the heat out of it. Quality stock is holding its value, like properties with very good improvements, water etc."

Prices for New Zealand dairy land had peaked in Mid Canterbury at around $55,000 per ha last season. Higher crop prices had seen arable land become a direct competitor to the dairy industry, also pushing up arable values.

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However, the next 12 months would see a price range closer to $40,000-$50,000 per ha.

Grtazing farm values were stable but had not risen to the expected extent, with the price per stock unit at $600 - $800, not the $1000 some people were expecting, Mr Saunders said.

Mr Saunders noted an increase in the number of unsold farms on the market, crediting a standoff between vendors and buyers expectations. Owners' reasons for selling included wanting to retire on a high market, consolidating and selling off excess land and the cost of finishing already-started dairy conversions.

However, a correction did not mean rural property was going to follow residential property into a slump.

"The rural market is certainly not in crisis. It's more that people are seeing a financial market volatility out there that New Zealand has not had to cope with before so they are holding off, and are not willing to pay premium prices.

"However, the fundamentals are still there. There is a worldwide shortage of protein. Crops are in demand. People are still selling land and people are still buying. It is just the gap between expectations of both parties that is changing.

"At the end of the day, dairying and cropping are still creating positive cashflow and land is still a good investment. They are not making any more, and if you have water as well you have got it made."

First National New Zealand General Manager John Stewart said the international credit crunch could hold a silver lining for New Zealand rural land values as it had turned some Asian overseas investors toward viewing food-producing land as the safest place for their money.


Established in New Zealand since 1985, First National has become the first stop for tens of thousands of property buyers and sellers throughout the country. From Kaitaia in the north to Riverton in the south, there are more than 80 First National Real Estate sales offices and 650 salespeople. Each is independently owned and operated, just like their counterparts in Australia's larger First National network. First National Real Estate is a co-operative, not a franchise, to bring maximum benefit to customers and members alike. While most property sales are local, our members benefit from a comprehensive referral network, not only throughout New Zealand and Australia, but also in Singapore, the United States and Canada.

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