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Rural property prices in New Zealand could be bottoming out

Data published by the Real Estate Institute show that the median price for lifestyle properties for the three months to March was almost flat on a year earlier, at $448,500 compared with $450,000 in the first quarter of 2008. The number of lifestyle property sales fell to 1,041 from 1,484 a year earlier.

The median price for farms sold during the quarter fell to $1.175 million from $1.685 million a year earlier. However, the price was comparable to the same period in 2007.

'We're now seeing the market adjusting to the affordable and sustainable levels we saw in the same period in 2007 before the unrealistic spike in 2008 caused by the high Fonterra payout,' said institute rural spokesman Peter McDonald, referring to Fonterra's record 2008 payout of $7.90 per kg of milk solids. Its projected payout for this season is $5.10 per kg.

There are regional variations. But only Hawke's Bay, Taranaki and the West Coast showed a rise in prices and turnover remained low with 231 farm property sales compared with 717 sold a year earlier. Canterbury and Otago showed the biggest drops in turnover.

With the small turnover in dairy farms, it's not realistic to state with total assurance that the market has turned around,' said McDonald. However, there were signs of renewed interest in rural real estate, he said.

But according to Bank of New Zealand's chief economist Tony Alexander the rural market is close to bottoming out although at present it is at its weakest for more than a decade.