Home > Our Publications > New Zealand Outlook > 2003 > August

MANY British farmers are looking to resettle in New Zealand on a nice piece of land, away from the crowds and pollution and with better weather.
The good news for them is that farm prices have started to flatten out after several years of rising prices.
Over the last three years, the rural property sector in New Zealand has been in a strong production, price and growth phase, which has drastically boosted on-farm profitability.
This upswing has flowed into good value growth for most farm properties.
However, there are now some signs that growth in farm prices is starting to plateau and there are likely to be some challenges ahead for the farming sector which could impact further on farm prices.
Specifically, some of the factors that have helped generate higher farm incomes are now working counter-cyclically to reduce New Zealand's export competitiveness. The flow on effect of reduced incomes to farmers suggests that the recent growth in farm prices could well be tested over the next 18 months.
By way of comparison, the lifestyle property market which is closely [inked to the residential market remains very strong with continued growth in buyer inquiry and volume of sales.
Prices for lifestyle properties continue to trend upwards and the outlook for this sector in the short to medium term looks very positive.
According to the latest QVNZ rural sales statistics, the average sale price of a farm across New Zealand (at[ farm categories) stabilised during 2002.
In the year to December 2002 the average farm price recorded was $702,000 - just fractionally ahead of $700,000 recorded the year prior.
This was the first time in five years that general farm prices had not shown a significant increase over the preceding one year sales period.
This overall trend is confirmed in analysis of REINZ figures that show average farm prices across the country increased just half a percent (o.5%) between December 2002 and March 2003.
The slowdown is shown up particularly in the sale of dairy farms. The average price for a dairy farm in New Zealand actually declined (albeit marginally) when compared to the preceding year. QVNZ statistics show, the average sale price of a dairy farm was $1,012,000 slightly under the $1,032,000 figure recorded for 2001.
A number of factors are starting to impinge on farmers' income, the most significant of which appears to be New Zealand's strengthening exchange rate.
* Source: Bayleys Real Estate. www.bayleys.co.nz