We were splitting the partnership in a crib in Wanaka and looking for another one at the same time we were buying a couple of hundred hectares from a neighbouring farm at home.
When given the price of the section and working out the per hectare price compared with the farmland my farmer asked, “how many stock units could I run on it?”
Urban sections aren’t directly comparable with farms but Don Brash points out just how out of kilter city prices are:
For one of the least densely populated countries in the world, it is ridiculous that tiny 500 square metre sections often end up costing well in excess of $250,000 – equivalent to $5 million per hectare. Yes, there are costs of servicing these new sections with infrastructure – but $5 million per hectare?
Five million dollars could buy you about 600 hectares of reasonable farmland in the Manawatu on which you could run about 6,000 stock units.
People complain that farms are expensive. I wouldn’t say they’re cheap but they’re far more reasonably priced than the sections Dr Brash talks about.
That’s a lot of money poured into what is usually a non-productive asset, if not a liability.
A section, and the house built on it, generally cost money and earn nothing until, if the market is favourable, it’s sold when there might be some capital gain.
That contrasts poorly with farms which are – usually – productive assets that provide jobs and earn export income.