Farm prices falling, says real estate institute

ANZ rural economist Con Williams says it is difficult to determine a definite trend in farm prices at this point in the season. Photo / Dean Purcell

Next few months will be crucial for determining if drop is part of a trend or whether values will bounce back.

Farm prices are falling but the next few months will be critical in determining whether the trend is firmly entrenched.

Real Estate Institute of New Zealand (REINZ), in its latest rural report, said the median price per hectare for all farms sold in the three months to September was $26,020 compared with $26,000 for the three months to September 2014 - a gain of 0.1 per cent.

However, the median price per hectare fell by 6.6 per cent compared to August.

REINZ's All Farm Price Index fell by 7.6 per cent in the three months to September, compared with the three months to August. Against September last year, the index fell by 6.5 per cent.

The index adjusts for differences in farm size, location and farming type, unlike the median price per hectare, which does not.

The institute's dairy farm price index fell 8.2 per cent in the three months to September compared with the three months to August. Compared with September last year, the index fell by 17.6 per cent.

ANZ rural economist Con Williams said it was difficult to determine a definite trend at this time of year, because of the low number of properties typically offered at around this time of year. "The next quarter will really tell whether the land market has re-set," Williams said.

REINZ rural spokesman Brian Peacocke said the indices tended to be volatile over July, August and September.

"A lot of the decline will relate to volumes being low at this time of the year - which is around the peak time for farmers' workloads with lambing and calving," Peacocke said. "The low volumes tends to throw the index out, and they can exaggerate movements."

Peacocke said the institute was waiting to see what happens this month and November to see whether there was any consistency to the price adjustment.

"What we have seen is that the very good properties held their value well while the second tier properties have tended to move around a bit."

Spring sunshine, warmer temperatures, good prospects for beef and lamb, and a slow turnaround in the dairy industry were lifting morale in the rural sector, he said.

For the three months ended September, the median sales price per hectare for dairy farms was $25,108 compared to $26,906 for the three months ended August, and $40,462 for the three months ended September 2014. The median dairy farm size for the three months ended September was 163ha.

Overall, there were 337 farm sales in the three months ended September 2015, compared to 387 farm sales for the three months ended August (down 12.9 per cent), and 347 farm sales for the three months ended September 2014. All up, 1,726 farms were sold in the year to September, 10.1 per cent fewer than were sold in the year to September 2014.

Grazing properties accounted for the largest number of sales with 45.2 per cent of all sales over the three months to September. Finishing properties accounted for 19.3 per cent, horticulture for 17.2 per cent and arable properties 10.1 per cent.

Farms falling

• Median price per hectare for all farms sold in three months to September was $26,020 - down 6.6% compared to August and up 0.1% on same period last year.

• Median price per hectare for dairy farms was $25,108 - down from $26,906 for three months ended August and $40,462 on last year.

• 337 farm sales in three months ended September, down from 387 for three months ended August and 347 last year.

• 1726 farms were sold in the year to September, down 10.1%.