Farm prices followed the Fonterra payout up and now they’re following it down.
New Zealand farm prices have fallen by a quarter across the country in the last year
and taken an even heavier hammering in Southland where the dairy conversion boom has ground to a halt.
Rural lifestyle blocks, however, are continuing to sell, with sales volumes increasing over June 2008 figures, and the median price for lifestyle blocks falling a more modest 7.4% year to year.
This will be worrying for people who borrowed a large proportion of the purchase price because the fall in values could mean they lose their equity in their properties.
But it’s a necessary correction to a market in which land values were not necessarily related to its earning capacity and unless you’re needing to sell there’s no need to panic. Prices went up, they’ve come down and they will, eventually, go up again.
Sheep and beef prices went up last season and the outlook for the coming season is reasonably positive; and the fundamentals which drove drove property prices up in the wake of the dairy boom haven’t changed.
The world is short of food and growing middle classes in China and India want more protein.
New Zealand farmers are very good at converting grass to protein and those who do it with low cost systems will not only ride out the recession but prosper from it.