The farming sector of the economy and specifically the dairy industry will later this week find out the scale of the Fonterra payout which is now expected to top $7.60/kg. This compares with the 2006/7 payout of $4.46/kg.
This scale of rural economic success has a natural and consequential flow onto the rural real estate market – especially the market for farms which is worth well in excess of $5bn per annum and seeing unprecedented growth in sales volumes and median prices as shown in the graph. The graph tracks sales of farms over the past 5 years measured as a moving annual total based on REINZ data shown in the blue line. The red line represents the median prices of all farms as measured over a moving 3 month period.
A key driver of the median price as reported in the REINZ Rural Monthly Update is the dairy sector – in the 3 months to April 2008 dairy farm sales totalled 163 with a median price of $3.9m. Clearly in the farming sector median prices and total sales are not as easily comparable as they are in the residential market. A key factor is the consolidation of farming units which had a consequential impact on medians.
Serving this active market are the specialist real estate companies who are actively talking up a very successful year just closed. Harcourts rural division recently reported their year to end of March with over $900m in sales a 20% increase. PGG Wrightson the specialist rural supplies company with a 64 strong chain of real estate offices reported total rural sales of $2.3bn – a 65% increase over the year which included the sale of 19 rural properties over $10m.
Currently the website features 9 dairy farms alone priced in excess of $10m, these amongst a total of 210 dairy farms. A total of 6,581 farms, agricultural units, rural properties as well as bare land are featured on the site with the most expensive being a 2 farm unit comprising 489.5ha near Gore on the market for $27m.
Clearly whilst the real estate industry is generally tightening its belt to manage a significantly slower 2008 in residential sales those offices with the benefit of an exposure to the rural economy are able to secure a steady and significant business as farmers seek to consolidate and drive the economic wealth of the country from the farm gate.
regarding that farm in gore – the GST on $27 million is more than your average paratai drive house – at $3,375,000
The UK housing market is in meltdown – biggest falls in 17 years, 2.5% in a month, down 4.4% y-o-y and down 7% plus from the peak in Oct 2007 (see todays news from Nationwide)
The US market continues to meltdown – latest Case/Schiller index this week shows 15% nationwide decline, and 17% decline in 18 months for 20 city index. 25% plus falls in California, its so bad one ex-capital city of California has become bankrupt as its tax base has been eroded.
How can this be? The UK has very low unemployment, has had record immigration these past few years and has apparently a structural deficit in house building/availability? These things are meant to prevent house price collapses aren’t they?
Sorry the above is slightly off topic:
http://www.telegraph.co.uk/news/uknews/2047581/House-prices-fall-by-biggest-margin-in-17-years.html
[...] was reported recently the rural real estate market is performing strongly with dairy cited as a key driver with [...]