That data from the Real Estate Institute of New Zealand (REINZ) showed farm sale numbers had fallen 18.9% for the three months ended June compared to the same period in 2019.
There were 261 total farm sales over those three months compared to 322 last year across the sale period.
The trend is even steeper when compared to 2018 numbers where farm sales totalled 427 and 459 in 2017 across those three months.
Four out of 14 regions recorded an increase in the number of farm sales. Waikato recorded the most substantial decline in sales with 20 fewer, followed by Manawatū/Whanganui at 13. Grazing and finishing farms comprised the largest number of sales at 28% each, while dairy sales accounted for 9% and horticulture 12%.
The median price per hectare rose 5% from $22,044 to $23,136.
Massey University Real Estate Analysis Unit and senior lecturer Ioana McCarthy said the market needed a correction and believed one could be on the way.
“There’s always been this link between volume and price and the volume tends to precede the value in price, so this decrease in volume should be indicative of a decrease in price,” she said.
If vendors are suddenly forced to sell then eventually there will be that downward push on price.
McCarthy said blaming banks for tightening its lending criteria for farm purchases was simplistic.
“There’s all of the regulatory compliance and people do not have as much interest in getting into rural property when you’re not sure what’s going to change going forward with your carbon emissions and nitrogen leaching – this is how I would react if I was buying a farm – I would be a lot more anxious and I would want to see a correction down in the price I was paying,” she explained.
Those reasons along with the ramifications of covid-19 meant there is huge uncertainty in the market, McCarthy said.
“There’s more and more risk coming in and I would think a savvy purchaser would say if I am taking that much more risk I would like to be rewarded for it with the right return and so we need a correction down,” she said.
Adding farmers had to be more conscious of paying a price when purchasing property that related to their income stream.
REINZ rural spokesman Brian Peacocke said knowing those regulations is part of the due diligence carried out by agents and vendors during the sale process.
“If there are subsequent regulations that come on down the line related to fresh water then that will just be a consequence of being involved in the business,” he said.
Peacocke said the data reflects a continuation of the emerging trend that has become evident over the last two years.
“Whether or not the volumes will get back to where they were, who knows?” he asked.
Adding the slide in sale numbers raised a question around whether numbers will stabilise at the current level, or if the downward trend will continue.
“Should it be the latter, given the range of issues currently impacting on the rural sector, not the least being the need for youthful rejuvenation of the farm ownership structure, it could be that an avalanche of potential sales is building up behind an earthen dam,” Peacocke explained.
“Should the dam burst, what is the likely impact on farm values – will values increase, stabilise or decrease?
When asked what he thinks will happen, he said he preferred to pose the question only.
One of the options available for vendors are delayed settlement structure arrangements, which allow younger farmers a stepping stone for farm ownership while allowing the owner the chance to phase out of ownership.
“We are starting to see this happening in the odd instance,” he said.
Southern Wide Real Estate Gore manager Mark Wilson said rather than a correction, the market in the southern part of the South Island had already adjusted, having come off what has been an inflated high and back to a more settled, realistic price.
“It’s caught up with itself. The pace that we got used to was never sustainable,” he said.
Wilson explained the market had evolved from one that was inflated and fuelled by dairy expansion to a more normal state.
“If you take that anomaly out of it. We are heading into what I believe is a stable environment where you will see more of a natural market without the artificial influences of rapid expansion,” he said.
Adding this had occurred in the southern region of NZ where prices had come back 18-22% since five to 10 years ago.
Since then, sales volumes in the region had been reasonably stable in the past few years.
“There have been dairy farm sales in Southland in the last 12 months and if you say there hasn’t been as many as there used to be, you’re right there’s not – but we’re in a different place too because there aren’t 20 new conversions happening.”
Prices being achieved from sales were still very stable, he said.
“If a farm is sensibly priced there is someone there to buy it.”
