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.