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Home / The Country / Rural Property

Finance shortfall 'hurting farm sales'

Owen Hembry
By Owen Hembry
Online Business Editor·NZ Herald·
17 Nov, 2008 03:00 PM3 mins to read

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KEY POINTS:

A shortage of funds for borrowing is hurting farm sales, says the Real Estate Institute of New Zealand.

Institute national councillor and rural spokesperson Peter McDonald said there had been plenty of inquiries for good properties.

"The only limiting factor is the availability of finance," McDonald said.

Farmers
had no problems with budgets but a shortage of borrowing funds was having an impact on certain kinds of sales, he said.

"We're seeing a lot more offers made conditional on finance and that's not possible in an auction situation where funds need to be immediately available."

The median sale price for farms in the three months to October was $1.5 million, compared with $1.3 million in the same period last year and $930,000 in 2006. The number of farms sold in the period was 390, compared with 582 last year and 470 in 2006.

McDonald did not expect prices to drop. "I don't see any reason why they would," he said. "Interest rates have come back, the dollar's come back, all very, very positive, the banks have all been stabilised, we're in the food business and of course that'd be the best business to be in at the moment wouldn't it?"

Westpac economist Doug Steel said the level of prices was cooling off a little bit. "You could expect a bit more of the same, maybe even a bit of downward pressure coming in the next 12 months or so," Steel said.

The short-term outlook for agriculture product prices was down, especially internationally, he said.

"The question, I guess, for prices at the farm gate is how much does the New Zealand dollar retreat offset those weaker world prices?"

"So from an income perspective just how much of a hit is this world slowdown going to bring and that'll be a determinant of where investors or farmers are prepared to pay for the land itself."

Land prices were starting from a strong position after a good run during the past six or seven years, he said.

"I don't think that necessarily means that they come down the other side because the medium-term outlook for product prices we still think is pretty healthy with the emerging market growth, the urbanisation in economies like China and India and the like."

Some of the recent cost increases borne by farmers were likely to fade and even pull back, which was already happening with fuel, while an aggressive easing in monetary policy was also likely to continue through 2009, Steel said.

Deals that made sense would still go ahead, although buyers and lenders could be a little more cautious, he said.

ON THE MARKET

Three months to October:

* Median farm price $1.5 million, up from $1.3 million last year.
* Turnover of 390 farms, down from 582 last year.
* Plenty of inquiries but finance is a limiting factor.

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