Banks behind rural property stagnation - REINZ

The national median sales price for all farms in the three months to May was $1,035,000. Photo / Hawkes Bay Today

The rural property sector remains stagnant because prices and sales are being dictated by banks rather than returns at the farm gate, the real estate institute says.

This year should have been a good one for dairy farmers with the second highest milk solids payout ever, but sales of dairy farms in particular had been disappointingly low because of a lack of confidence among lenders, REINZ national president Peter McDonald said.

Only 11 dairy farms were sold last month while in the three months to May the median sales price for a dairy farm in New Zealand was $3,700,000 - significantly less than the $4,050,000 recorded in 2008.

The average price per hectare for a dairy farm during May was $39,653.

Meanwhile the national median sales price for all farms in the three months to May was $1,035,000, slightly ahead of April's figures, but still well down on the median of $1,860,000 recorded during the same period two years ago

Just 319 farms sold in those three months this year - an increase on the 288 sold during the same period last year, but less than half the 745 sold in the three months to May 2008.

It had been a frustrating season for most agents, with lots of interest and properties listed, but a lack of sales because of an unavailability of finance, McDonald said.

"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," said Mr McDonald.

However rural property sale prices and current were being determined by lending policies and the availability of finance rather than farming returns, he said.

Two years ago banks required a 30 per cent deposit, now some were asking as much as 70 per cent, while banks were requiring mortgages to be taken out over 20 years, as opposed to 30 years previously, McDonald told nzherald.co.nz last month.

"They are saying they are lending but I have not seen any evidence of it," he said at the time.

"It would be concerning if the lending attitudes currently preventing New Zealand farmers buying into dairy properties at reasonable prices should suddenly change and cause another market spike, like we saw in 2007, if lenders were to decide they want to invest in agriculture again."

In the regions the largest number of farm sales during the three months to May was 41 in Canterbury and in the Waikato, followed by 34 in the Bay of Plenty. 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.

The median price for finishing farms also increased from $1,225,000 in the three month period ending in April to $1,269,200 at the end of May.

During the past year median prices for farms have fallen in nine out of the 14 districts.