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Farm sales reach record low as finance becomes scarce
Limited availability of finance due to tighter credit restrictions led the total monthly amount of farm sales in New Zealand to reach a record low in October. There were 114 farms of all types sold during the month, with the previous low being 126 in September 2006. Interest .co.nz began recording monthly totals of farm sales in early 2003.
The Real Estate Institute of New Zealand (REINZ) Rural Market Report said that the median sale price of farms also dropped. In the three months to the end of October, the median price fell to NZ$1.5 million from NZ$1.67 million during the three months to September. The national median price in the three months to October 2007 was NZ$1.3 million.
"There have been plenty of enquiries for good properties. The only limiting factor is the availability of finance," REINZ spokesman Peter McDonald 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," McDonald said.
The total amount of sales in October 2008 was 35% less than the average of the last four October months.
Dairy farm sales in October rose slightly from September, to 15 from 13. Finishing farm sales (14 from 11) and forestry farm sales (5 from 2) also rose. Sales of grazing farms fell to 67 from 75, while horticultural farm sales fell to 6 from 13.
Regionally, there were no farm sales on the West Coast of the South Island for the second month in a row. The two regions with the most overall sales were Waikato (18 from 16 in September) and Canterbury (18 from 21). The region with the largest fall in sales volumes was Southland, where 15 farms sold in October compared with 24 in September.
Median sale prices rose in the three months to October from the three months to September in Auckland, Gisbourne, Taranaki, and Canterbury.
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The median sale price for lifestyle blocks in the three months to October also fell, down to NZ$425,278 from NZ$435,000 in the three months to September. Sales volumes also fell slightly in the three months, to 1,054 from 1,071.
2 Comments
Well this guy is full
Well this guy is full of sh*t
"There have been plenty of enquiries for good properties. The only limiting factor is the availability of finance," REINZ spokesman Peter McDonald said.
Mr McDonald is talking real estate speak for a crash.
The problem is the total lack of profitability. If you can prove you are making money the banks will lend. The problem is there are no profits left in our farming systems. Its sounds stupid but in the past profits haven't been a prerequisite to purchasing a farming business. Farm debt is still climbing and 20% of the farms have 73% of the debt, they are history. Banks are looking at losses in the billions Im talking over 10 billion maybe 20.
If you want to know the banks at risk look for banks that have grown their Loan book rapidly over the last few years im guessing Wrightson, National, ANZ, Sth Canterbury finance but now via the Taxpayer now they have deposits guaranteed, I guess all will be well.
Mr McDonald needs to get a proper job in a productive sector.
By the way NZ is entering its second year of major drought and affects are now being felt over the whole country.
Ouch! Pretty brutal Andrewj but
Ouch!
Pretty brutal Andrewj but as usual on the mark.
Many sheep and beef hill country farms with no debt will struggle to make profits this year. The 20% of dairy farms with most debt will not. Nor will some of the others given the likely continued deterioration in payouts.
This fact is hidden by surveys that look at intended expenditure rather than the expenditure required for a viable business into the future. Skipping fertiliser application and basic R&M will only disguise the problem for a short time before reduced pasture and stock performance creep into the outcome.
Drought is not a one year effect either. Soils, pastures and stock are all living entities and take time to recover. Add this to reduced inputs and the effect compounds no matter what the "vested interest" cheerleaders trumpet.
Maybe Banks are actually changing from their blanket "tick the box" mentality as criteria for loans to actually looking at the viability of individual cases. (But do they actually know enough to do this??)
If so, many Bank Managers will be having some nervous jitters at the quality of the loans made during the past few years of ill disciplined lending. But then the magic of capital gain is hard for some to be weaned off.
Drought causes