The rural property market is a slow slog for sellers, with cashed-up buyers thin on the ground and differing price expectations, First National Group's quarterly rural survey shows.
Fifty-five percent of First National’s rural offices reporting on the three months to mid November described demand from buyers as low, and just 25% reported sufficient listings to meet demand.
Grazing blocks and lifestyle blocks were the main sellers, with only a handful of dairy farms changing hands since mid August.
Prices for rural properties for sale were down by 10 - 25% in Northland, the Waikato and Canterbury and sales volumes were still around last year’s low levels.
Prices of dairy land have lingered around $35 - $40 per kg milk solids, compared with $55 per kgMS at the peak of the market but low volumes are making life difficult for valuers.
News of an improved dairy payout was deemed by most offices to be having little effect on farm sales, other than reducing pressure to sell. However 25% thought it may have future positive spin offs for dairy-related land, such as stabilizing prices of grazing blocks.
Bright spots in the survey were increased demand for forestry land in Marlborough and high demand for gold variety kiwifruit orchards in Te Puke, with some buyers paying up to $480 per hectare.
First National General Manager John Stewart said banks had long been more interested in cashflow than equity but debt levels were having a significant part to play in loan requests being declined or restricted, even if cashflow was deemed healthy.
“It will take more than a higher payout for the dairy market to pick up. Many of our offices are reporting that those exiting the diary sector did so when the market was at its peak and few individuals seem prepared or able to enter at present.
“Additionally, the market is full of anticipation around the rumoured down-selling of some properties by corporate owners. Whether these companies will be able to release the numbers of properties they seem keen to will, I imagine, be legislated by the price purchasers are prepared to pay, or the view of their banks on the viability of the sector.
“Properties in the meat & wool, cropping and grain sectors are not being heavily sought either,” Stewart added.
“Given the government’s projected shift on Kyoto may be having an early effect on forestry plantings, we could see continued selling of second rate farm properties as forestry land although not with as much fervour as was the case 15 – 20 years ago.”
Advice for sellers of rural land was mixed, but most agents concurred that prices were not going to change dramatically in either direction so listing now or waiting would depend on clients’ reasons for sale.
“It’s not all doom and gloom though,” Stewart said.
“Farmers are patiently waiting it out and only those needing to sell are out there. Buyers wanting to invest in rural are around but many are still finding the banks are not giving them room to extend themselves like they may have done in the past.”
Lifestyle property sales were continuing to underpin rural sales over most of the country. Prices had dropped by up to 20% in many areas but some areas, such as the lower North Island, lifestyle property prices had risen by 10% since January.