Rural property markets remain depressed in the latest sales figures from real estate agents."The bright future for farming is not being reflected in either the prices or the number of farm sales," Real Estate Institute president Peter McDonald
Rural property markets remain depressed in the latest sales figures from real estate agents.
"The bright future for farming is not being reflected in either the prices or the number of farm sales," Real Estate Institute president Peter McDonald said today.
"For most agents it has been a frustrating and challenging marketing season."
There were a lot of good properties listed, but the number of successful sales was down on past years because the buyers could not borrow sufficient money.
Economists have previously noted that where farmers are looking to the capital from a property sale to fund their retirement or another change in lifestyle, they tend to take a farm off the market rather than accept less than their "target" price.
This cuts the number of properties for sale, and means that many of the remaining listings are "soft" because the seller is under pressure from lenders or other creditors.
Ministry of Agriculture and Forestry economists said yesterday that the global economic crisis and a tightening of credit standards at banks had slowed credit growth in agriculture, with a "dramatic drop" in the number of land sales.
"Only 2190 farms were sold in 2009, in contrast to an average of 7519 farmers sold each year between 2003 and 2008," the economists said.
The National Bank's rural investment advisor, Kevin Wilson, said today that "smoothed" data from the institute suggested a fall in values of around 30% from peak levels.
"The rural land market continues to languish on very low volumes as it struggles to decide where values now sit," he said in the bank's Rural Report.
The latest real estate figures show that over the three months to May, 319 farms were sold, up on the 288 sold in the same period last year during the global financial crisis, but less than half the 745 sold in the three months to May 2008.
The national median farm sale price rose to $1,035,000 for the three months to May 2010, fractionally up on $1m for the three months to April 2010, but still down on the median of $1.15m for the three months to May 2009 and well below the median of $1.86m for the same period in 2008.
"Rural property sale prices and current values are being determined by lending policies and the availability of finance rather than farming returns," said Mr McDonald.
"It should have been a good year with the second highest milk solids payout ever, but sales of dairy farms have been disappointingly low because of the lack of confidence among lenders."
Only 11 dairy farms were sold in the month of May and the median price for the three month period was $3,700,000, which is $50,000 down on the median at the end of the three months to May 2009 and significantly less than the $4,050,000 median for the same three month period in 2008.
The average price per hectare for May dairy farm sales was just $39,653, an increase on the April average of $34,776, but still below the February average of $43,970.
The average price of dairy farms – calculated according to dollars per kilogram of milksolids – fell to just $36 in April but recovered to $45 in May.
"Prospects for dairying have never looked better with forecasted payments expected to set new records in the oncoming years and we need to see consistent investment," Mr McDonald said.
There were increased sales of grazing properties with 151 sold in the three month period, but the median price fell from $900,000 at the end of April to $871,875 at the end of May.
There was also a further increase in the median price for finishing farms from $1,225,000 in the three month period ending in April to $1,269,200 at the end of May.
