Price of farms retreats but inquiries 'positive'

File photo / NZ Herald

Farm prices have fallen to the lowest level since 2003, says the Real Estate Institute of New Zealand.

The median price per hectare for all farms for the three months ended July was $14,649 - compared to $17,901 in the same period last year the lowest point since September 2003, the institute said.

A total of 301 farms were sold during the three months ended July, down from 393 in the period ended June, although higher than the 262 sold during the same period last year.

Institute rural market spokesman Brian Peacocke said the drop in sales reflected the time of year and the focus on seasonal workloads.

"Farmers are keenly watching events in financial markets and the trend in the New Zealand dollar," Peacocke said.

"The high dollar over the past few weeks is causing some concern, however, the outlook for the currency is difficult to predict and the situation, particularly in respect of the United States, remains volatile," he said.

"Nevertheless, forward inquiry for quality properties remains positive."

Federated Farmers president Bruce Wills said farmers would not be worried about farms losing value.

"The important focus is on cash flow," Wills said. "What exploded those land values in the mid to late 2000s was very free and easy credit from the banks."

The farming community went on a borrowing binge which got built into land values, Wills said.

"So we're now in a situation where that excessive debt is being managed out of the system so we're seeing prices come back as a consequence ... they'd certainly got out of kilter."

Recent events reminded the industry that volatility was here to stay.

"It doesn't make sense to borrow a whole lot of money and run your business on the edge when you see these sort of wild gyrations.

"We've just got to keep repaying down debt, build in some safety margins and just run a far more conservative business than we have in the past."