15 farm sales fail


Neal Wallace reports that 15 farm sales fell through last week because the would-be purchasers were unable to secure finance.

A real estate company told the Otago Daily Times funding that had previously been arranged could not be secured in time.

Some of the contracts were unconditional when funding became unavailable, which meant the buyers lost their deposits, in some cases worth several hundred thousand dollars, or had to pay penalty interest. The agent asked not to be named.

For each sale that failed to settle, up to four other land and property deals were affected.

“You have to be in a really strong position to settle a rural real estate deal at the moment,” the agent said. The uncertainty had placed many farmers under enormous stress and strain.

The price of farm land has been driven up by last season’s dairy boom but steep prices weren’t only being paid for dairy farms and those suitable for conversion or dairy support. Sheep and beef farm prices also rose until they were well out of kilter with what could realisticly be made from them.

Westpac Bank chief economist Brendan O’Donovan told Jamie McKay on The Farming Show that banks wouldn’t be worrying about existing customers providing they could service their debts. But they would be looking much more closely at applications for new loans and tightening their criteria for those.

There’s Still Gold in Grass


The price of farms sold doesn’t reflect the supposedly weakening economy with record median price for dairy farms at $4m last month.


The dairy boom is having a flow on effect to other prices with the national median for all farm prices at $1.8m, up by more than 50% on May last year.


Real estate agents at the fieldays told me they had no problem selling farms, but there were more buyers than sellers so they’re having problems finding farms to sell.


However, 72 Otago farms sold in May, up from 66 the previous month and 39 in May last year. Of those farms 31 were finishing and 28 grazing, which are sought after by dairy farmers. Five were special, five dairy and one each arable, forestry and horticulture.


In Southland, 108 farms sold in May, up from 103 in April and 96 in May 2007.


The median Otago farm price was just above the national median but eased to $1.87 million in May, from $1.96 million in April, but still up on the $1.16 million in May 2007.

In Southland the median price rose to $2.41 million in May, up from $2.37 million in April and $1.30 million in May 2007.


REINZ rural spokesman Peter McDonald said while fuel price rises will hit farming hard that’s not yet reflected in property sales.


Mr McDonald said the main drivers for the rural strength were city investors wanting to get into farming, and dairying in particular, as well as farmers wanting to extend their landholdings and amalgamate properties where possible.


“It is clear that farmers are taking the view that now is as good a time as any to amalgamate properties to achieve better economies of scale.”

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