Farmland market set to move

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The residential housing market may seem to finally be slowing but most expect farm property prices to keep rising, according to Massey University's most recent Real Estate Market Outlook Survey.

Real Estate Analysis Unit professor Bob Hargreaves says dairy land is rated the strongest, with 30 per cent of respondents expecting a large increase in sale prices over the next three months.

A further 10 per cent believe arable/fattening units will experience a large increase as well.

"The big increases being suggested are on the back of the dairying, with the arable being driven by the ability for it to be converted to dairying," he said.

The quarterly survey, a look into the future, is based on confidential questionnaires completed by rural real estate market experts, drawn from the banking, real estate and valuation professions.

While dairying is driving the predicted increases, other farms are likely to stay the same, or have price increases according to the survey.

It says 30 percent of experts believe there will be a moderate increase in hill-country farms, while 20 per cent believe horticultural land prices will go up moderately.

The expected lift in dairy land price comes on the back of the record payout of $6.40 per kilogram of milksolids this season.

Farmers are expected to pocket some of that, and as in the past, they are expected to go shopping for more land. All around the world, farms are getting larger, Prof Hargreaves said.

Subsidies and soaring demand for biofuel crops such as maize in the United States and Latin America have increased the prices paid of other crops, including cereals grown overseas for animal feed.

"I was talking to a farmer in Iowa in the US and he said the price of corn has doubled there.

"Land has gone up by the same amount he said to me," Prof Hargreaves said.

That has implications for grain-fed animals such as feed-lot beef, chicken and pork.

It means New Zealand grass-fed animals should be in greater demand, based on price alone.

There is a world shortage of animal protein and that should help lift lamb prices, making hill-country farms more profitable, too, Prof Hargreaves said.