Examining Changes in the Value of Rural Land in New Zealand between 1989 and 2003

This paper uses valuation data from Quotable Value New Zealand to examine changes in the value of the rural land in New Zealand between 1989 and 2003. The value of rural land reflects the profitability of agriculture as well as the returns to alternative land uses, and has a large impact on the prosperity of rural areas. The paper highlights the importance of both changes in land use and changes in the value of land in different uses in explaining overall changes in land values. It also examines the relationship among productive characteristics of the land, the local climate, various local amenities, and changes in land values and land use to better understand what factors have been driving overall changes in the value of rural land across New Zealand. We find that the real value of rural land in all uses increased substantially over the years being examined. Land use in rural areas also changed considerably during this period, but these changes in land use were essentially uncorrelated with changes in land values. Our regression results indicate that rural land values increased the most in less populated areas with good climates and local amenities. Initial land use also plays an important role in explaining the variation in changes in rural land values with greater increases in land values found in areas with more land initially devoted to urban uses and commercial forestry, and less land initially devoted to horticulture and lifestyle uses.