KEY POINTS:
The rural property market has had a typically slow start to the year but the Real Estate Institute is still picking 2007 will be a strong year.
Institute figures yesterday showed the median farm sales price for the traditionally slow month of January was $1.16 million, up 2.2
per cent on January 2006's $1.13 million but down on the strong December figure of $1.42 million.
Turnover of 140 farms last month was comparable with the 145 in January 2006.
But the institute said the four main categories of dairy, finishing, grazing and horticulture all had good annual increases in their medians, with dairy's hitting $2.97 million, albeit on low turnover. That was up 14 per cent compared with December's $2.59 median.
However, the lifestyle sector was "confused" with the median dipping to $415,000 from $450,000 in December as turnover fell by nearly 100 properties.
Institute president Murray Cleland warned there were "clouds on the horizon" for the rural sector, including a strong dollar and falling sheep-meat prices.
He also said his gut instinct was that the rural market "might just be starting to flatten a wee bit".
But he said the rural sector had had a great run in recent years and if the strength of prices, especially dairy farm prices, was anything to go by then 2007 should be another "pretty strong year" for rural real estate.
"I can see no reason why there's going to be any change in the market."
However, any fall in projected dairy payout or significant fall in other farm gate prices were risks for the market.
The note of caution being sounded by the institute follows a warning from Reserve Bank Governor Alan Bollard last year that farmers should not expect the double-digit growth of farm values in recent years to continue.
Also, last month's publication of rural lender Rabobank's survey from late last year showed farmer confidence about the year ahead had declined significantly. The biggest drops in confidence were among dairy and sheep farmers.
However, Rabobank said 85 per cent of farmers still expected to maintain or increase investment in their farms, reflecting a long-term confidence. The bank also said it did not expect any major retraction in land values.