Rotorua is set to benefit from what's shaping up to be a bumper few years ahead for the region's dairy farmers.
It's likely the increased dairy payout announced by Fonterra will lead to increased land prices in rural areas which could trickle down to other property investment markets.
Several companies are already noticing economic spinoffs associated with an explosion of forestry conversions around the Central North Island.
Hepburn Electrical has worked on nearly 20 new dairy sheds built near Rotorua, Taupo and Tokoroa over the past two years.
With most projects worth between $40,000 and $60,000, owner Tony Feek said the work was very profitable.
His is one of several companies hoping to capitalise on the growth of forestry conversions which is expected to skyrocket over the next three decades.
Carter Holt Harvey has already indicated it plans to turn 22,600ha of land, now planted in pines, into 90 dairy farms over 25 to 30 years.
About 750ha to 900ha of forestry areas will be cleared each year, injecting $100 million into the region's economy.
With Fonterra forecasting a payout of $5.53 per kilogram of milk solids for the 2007/2008 season, it is likely even more land will be developed into dairy farms as investors look to "get a piece of the action".
Phillip Berry, a rural specialist at Harcourts Rotorua, agreed the higher payout would inflate rural land prices.
"Dairy farmers who were sitting on their hands waiting for a good payout may consider selling in September or October after calving," he said.
"It made little sense for them to sell during a low payout year because they'd be giving away the value of their farms."
The high payout meant banks would consider more favourably those farmers needing to borrow to buy land.
Harcourt's chief of operations, David Martin, said the flow-on effect for the residential housing market wouldn't be immediate.
"It will happen as farmers become more profitable."
However, he believed any gains in the housing sector would be offset by high interest rates driven by the Reserve Bank and its attempts to stabilise the economy.
Meanwhile, local dairy farmers, including Rerewhakaaitu sharemilker Tony Hanham, are revelling in the predicted payout.
"I'm rapt. This is pretty good news.
"We have been struggling on a $4 payout for far too long.
"Now we can put money back into our businesses and get ahead."
Mr Hanham said everyone benefited from a strong payout.
Farming's cash cow moo-lah
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