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Land price correction underway

Rural News
Land price correction underway

Dairy farm sales are at a virtual standstill with a 30% slump in values starting to emerge reports Rural News. Real Estate Institute of NZ figures for the three months to the end of January show just 40 dairy farms sold compared to 156 in the same period last year. Real Estate rural spokesperson Peter McDonald says only nine sales in January went into those figures, at an average price of $53/kgMS. "˜That was a little higher than I thought it was going to be. At the moment in Taranaki we're at $45 to $47/kgMS.' That compares to $66-68/kgMS at the peak of the market last year, and an average of about $65/kgMS nationally. Values in Taranaki are traditionally towards the top end due to the smaller farm size and interest from neighboring properties. In the current climate, there is also a finance factor, says McDonald. "˜In Canterbury all your dairy farms are $15 to $20 million which are probably harder to finance at present and require syndicates and equity partnerships to be put together.' Despite the low turnover, there are no more farms on the market than normal and vendors are increasingly open to negotiation, says McDonald. The deals being done now are "˜round table' rather than auctions and tenders and there is a growing trend to vendor finance."˜Say someone is retiring and they are selling their farm for $5 million, they might leave $1 million in the property on a 20-year mortgage.' McDonald says there are good indicators values will now hold, given the 30% correction in the market which rural valuers and lenders have predicted, has already happened. "˜We believe it's just a matter of time before new interest rate levels result in a return of buyer interest.' However, specialist rural valuer David Smyth of Curnow Tizard, Hamilton, says he expects to see the low volume of sales last for some time as dairy land in Waikato and King Country slips to 2005/6 values. That means prices "˜in the early to mid $40s/kgMS. Last year we reckon the average was $57/kgMS.'

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