20 Sep 2010

Farmland prices fall

3:13 pm on 20 September 2010

The average price of a hectare of farmland fell by two thirds in the past year to just under $30,000, while the average dairy farm price dropped by a third, latest data from the Real Estate Institute says.

Its report says the median price for dairying properties in the three months to August was $3.1 million, compared with $4.65 million in the same period in 2008.

However an institute director, Bryan Thomson, cautions sales volumes are too small to get a true picture of land values. Just three dairy farms changed hands last month.

Mr Thomson says with commodity prices currently quite strong, many farmers thinking of selling up have decided they can afford to wait for the price they want.

He says the sector is in a good position for recovery once buyers' and sellers' expectations align themselves better.

The fall in values has left some farmers who borrowed heavily while land values were rising paying crippling interest for assets worth much less.

An independent rural finance specialist, Don Fraser from Fraser Farm Finance, says many farmers took on too much debt in the boom times.

He says banks are very supportive but they are also over-exposed, and if farmers are not realistic, there will be more mortgagee sales.

Two-thirds drop in average prices

The Real Estate Institute report says the average price per hectare for all types of farms has dropped by two-thirds to $29,739 in August down from a peak of $90,125 in August last year.

The average dairy farm price on a per kilogramme of milk solids basis also fell to $33 last month, from $45 in May.

In the three months to August, 192 farms were sold, which is a slight increase on the same period last year but well under the 516 sales for that period's transactions in 2008.

The number of lifestyle properties being sold is also continuing to decline.