The "euphoria" created by the hefty Fonterra payout last year has evaporated, bringing the rural property market back down to more realistic levels, the latest Real Estate Institute of New Zealand (REINZ) Rural Market report reveals.
After a "crazy year" between 2007 and 2009, REINZ national councillor and rural spokesperson Peter McDonald says rural real estate prices now mirror those of two years ago. However, there has been a significant drop in the number of properties changing hands.
The median sale price of rural properties in the three months to June this year was $1.15 million, with a Fonterra payout of $4.50. This compares to $1.25 million for the same period in 2007, when the Fonterra payout was around $4.46. In June 2008 the median price reached $1.81 million.
"The Fonterra payout is a pretty good barometer of where we can expect the rural real estate market to be," McDonald says.
Meanwhile, in the three months to June 2009, only 285 farms were bought and sold. This compares to 665 properties two years ago.
Some parts of the South Island have been particularly hard hit, such as Southland which saw only 21 farm sales compared to 103 two years ago.
McDonald attributes this to less farmers from traditional farming areas such as the Waikato and Taranaki moving south to convert cheaper farms there from dry stock to dairy.
The statistics also reveal that in the three months to June 2009, compared to the three months to May 2009, the biggest median farm price rise was in Otago, which rose from $847,500 to $1,240,500.
The biggest drop over this period was in Taranaki which fell from $1,501,250 to $528,500. Lifestyle blocks continued to follow residential trends, with the number of properties changing hands jumping from 1,177 in the three months to June 2008 to 1354 in June 2009, with the median price now at $421,250.