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Farm sales down in the face of cooling confidence

17 Oct 2006

The lifestyle property market enjoyed the benefit of a rising residential property market in September, but farm sales were significantly down, apparently in response to gathering concerns about the dollar, interest rates and the rural economy, according to the latest rural property market report from the Real Estate Institute of New Zealand (Inc). 

Farm sales were at a seasonal low, with just 126 sales, compared with 175 in August, 173 in September 2005 and 184 in September 2003, but echoing the dip in sales in September 2004 when sales fell to 139 transactions.

The principal reduction in sales was in grazing properties, down from the September 2005 figure of 101 sales to 62 in September 2006.

However, part of the problem was a shortage of listings, according to REINZ National President Murray Cleland, “It’s not that there has been any dramatic reduction in confidence in farming but a combination of factors such as prices, interest rates and where the dollar is has tended to result in farmers sitting tight until that sort of uncertainty clears. This in turn has resulted in a lack of listings and the drop in sales, especially in grazing properties which is always the single largest category of sales.”

Mainly as a result of the lower sales the national median farm sales price was down from $960,000 in August to $915,000 in September, still well up on the September 2005 figure of $873,000, the September 2004 figure of $750,000 and the September 2003 figure of $610,000.

In lifestyle properties, total sales were up from 648 in August to 668 in September 2006, also up on the September 2005 figure of 617 sales.

However strong increases in sales in areas such as Hawkes Bay, Manawatu/Wanganui and Nelson Marlborough were not sufficient to offset the fall in sales in Auckland region and largely flat sales in the Waikato and the Bay of Plenty, and the national lifestyle median price dipped from its August 2006 figure of $415,000, to $400,000 in September.

Among farm sales and prices, dairy property transactions achieved just 10 sales, with the median price down from $2,370,000 in August to $2,010,000 in September, “But with just 10 sales it would be inadvisable to draw too many conclusions about dairy farm prices, which continued to be strong with demand exceeding supply especially from investors on the other side of the farm gate”, Mr Cleland said.

The grazing property median price fell from the August figure of $907,500 to $812,500 in September, as a result of the drop in sales, while horticultural property sales, assisted by keen interest in kiwifruit and viticulture properties, were consistent at 22 sales in September (22 in August) compared with 29 in September 2005.

The horticultural property median price increased from $767,500 in August to $810,000 in September, a good gain on the September 2005 figure of $665,000.

Download full release: REINZ Rural Market Report Sept 2006.pdf