Funding tight but strong demand could boost farm sales

Growing demand could see significantly more dairy farm sales during the next two months, says the Real Estate Institute of New Zealand.

The median farm sale price for the three months ended January was $1.1 million, up from $1 million in the same period the previous year.

There were 46 dairy farms sold during the three-month period, up significantly on 33 the previous year but only slightly ahead of the 43 sold in the period ended December.

Real Estate Institute rural market spokesman Peter McDonald said there was interest in all classes and categories of rural properties.

"The increase in dairy farm sales in December has not continued into January, traditionally a slow month," McDonald said.

"But a considerable number of dairy properties are currently being marketed by tender or auction throughout the country and demand seems to be growing, so we could see significantly more sales in March and April."

ANZ Commodity Price Index for January showed the price of skim milk powder was up 14 per cent on the previous month, with whole milk powder up seven per cent.

The Commodity Price Index hit another record high in January, with the world price index for dairy products at its highest level since August 2008.

"Fonterra are out there talking reasonably confidently around the countryside," McDonald said.

"It's putting a bit of confidence out there with people."

Fonterra in December raised its forecast payout for the 2010/11 season by 30c to $7.30-$7.40 per kg of milksolids before any retentions, with a $7.40 payout based on stable production potentially worth about $9.5 billion.

The financial market remained very tight, McDonald said. "It's still quite restrictive and it's probably quite a good thing because the interest and the confidence that's out there at the moment if that was coupled with a very free and open monetary policy ... could well create a unrealistic spike."

People were looking at all price brackets "and then there's probably a bit more interest now in the back country farms too, sheep and beef".

In total, 219 farms of all types were sold during the period, compared to 208 the previous year.

"Recent sales have included dairy support blocks, sheep and beef grazing properties, vineyards and other horticultural units," McDonald said.