Painful price falls expected as farm sales slow

Some farm prices could fall up to 30%, a farming leader and former valuer says, after figures showed a collapse in sales volumes. Real Estate Institute figures show 305 farms were sold in the past three months. That was down almost 60% on the same period last year.The median farm sale price in the past three months was $1.5 million,  down from almost $1.8 million a year ago reports Stuff. Fed Farmers meat and fibre chairman Bruce Wills said: "Low [sales] turnover is the preface to quite substantial falls in value." Mr Wills was a registered valuer and banker for 20 years before going farming four years ago. In the past, he expected a 20-30% "correction" in prices. However, that had to be seen in the context of farm prices doubling in the past few years, after doubling in the 1990s as well. Trade Me Property shows listings for more than 9000 farms and small blocks, many times the 305 sold in the past three months. "Property is just not moving and there is a lot on the market," Mr Wills said.That would feed through into lower prices when some were forced to sell. More mortgagee sales were likely, in time, and there had already been forced sales for people who borrowed heavily in the past few years, gambling when prices were high. Up to 10% of farms would be hit, but most would come through relatively unscathed. However, Real Estate Institute rural spokesman Peter McDonald said it was heartening that, despite the international financial downturn, "farm prices are holding firm" compared with the end of last year. It was just a matter of time before much lower interest rates saw a return of buyer interest. Turnover was down because available cash was "at a premium", Mr McDonald said. Farm prices were also being held up because of a fall in costs such as fuel, fertiliser and feed, along with lower interest rates."So farmers' bottom lines are not too badly affected," Mr McDonald said. In contrast, Mr Wills said the expected price falls would be "painful", especially hitting poorer quality farms away from towns. "Marginal property carrying big debts we are going to see prices come back to a more sensible realm," he said. Sheep and beef farms were making only 1 -2% returns on the farm's value. "Many farms in recent years have made a negative return," Mr Wills said. They have made substantial cash losses and only survived by borrowing more money." Farmers collectively owe banks about $42 billion, compared with $7 billion in the 1980s.