Insecurity leads to sales drop of 30%
Farm sales are down more than 30% from last year, and insecurity about the future of farming may be to blame.
Rural spokesman for the Real Estate Institute of New Zealand (REINZ) Brian Peacocke said tension in the farming ranks was palpable and influenced farm sales.
For the three months ending October, 97 fewer farms were sold compared to last year, a 35% drop, REINZ data showed.
In the year to October, 284 fewer farms were sold than last year, an 18% drop.
Discontent with government policies was intense and frustration about unrelenting cost increases was a dark cloud, Peacocke said.
Waikato dairy farmer Pete Morgan said the current high milk price and the long contracts to deliver milk that many farmers had signed would traditionally mean farmers would take risks.
However, the uncertainty over interest rates, inflation and increasing compliance affected confidence and they did not want to take any risks, Morgan said.
Banks were also being aggressive with their lending criteria and the risks they wanted farmers to take, he said.
He hoped the low farm turnover meant the price of land would stabilise and a truer reflection of land values would emerge. Earlier, land prices were often linked to aspirational sales, he said.
Scenario testing on possible future budgets, milk pricing, inflation and operating costs had made him take a conservative approach to future business.
REINZ data showed there were 7% fewer dairy farms, 20% fewer dairy support farms, 16% fewer grazing farms and 13% fewer finishing farms sold in the three-month period compared to the same time last year.
Figures for arable farm sales were the same as last year.
The median price per hectare for all farms sold in the three months to October dropped 19% year-on-year.
The current median price was $25,270 per hectare compared $31,360 last year.
Peacocke said there was a high number of properties on the market, and it would be interesting to see what November sales looked like.
‘‘Just what is triggering this surge of properties for sale is yet to play out, but this indicates some concerning trends,’’ he said.
‘‘In terms of returns for primary produce, given the marketrelated signals reflecting an easing in price levels for beef, lamb and dairy products, the mood of caution is sobering,’’ he said. Land values would inevitably come under scrutiny, Peacocke said.
Earlier this year a Federated Farmers survey showed farmer confidence had slumped to its lowest level in 13 years because of rising costs, supply chain disruption and concerns over government reform.
More than 1200 farmers took part in the survey and almost half of them said current economic conditions were bad.
Lifestylers were also feeling the inflation pinch. There was a 30% drop in the number of lifestyle properties sold in the year to October. A total of 3016 fewer properties were sold, down 54% on the same period two years ago, Peacocke said.
Inflation and the resulting increase in the official cash rate drove the decline in sales, he said.
Issues relating to the levels of equity, cash flow and serviceability for potential borrowers were influenced by increasing interest rates, which in turn impacted sales volumes across the country, he said.