Real estate leaders are warning overseas investors could start dominating the rural property market unless banks start backing local farm buyers.
Real Estate Institute of New Zealand president Peter McDonald said a lack of confidence from lenders had seen property sales for the three months to March 31 this year remain low, with just 210 selling compared with 231 for the corresponding period a year ago and 717 in 2008.
The comparable figures for Otago were 17, 21 and 82 and for Southland 19, 16 and 104.
Farms were for sale but Mr McDonald said most were not advertised because the seller had had transactions fall over due to finance not being forthcoming for the buyer.
"Banks will deny it and say their policy is the same, but at the business end nothing is happening, transactions are falling over. A purchaser who would've qualified [for finance] a few months ago no longer qualifies," he said.
He understood farm sellers around the country were contacting Chinese-owned Natural Dairy New Zealand, which wanted to establish itself as a dairy farm owner and milk processor.
"All of a sudden, you get a buyer talking $1.5 billion in cash and suddenly farms are on the market."
Mr McDonald said the lack of activity in the dairy market was a surprise, given the expected $6.05 a kg of milk solids payout this season was one of the highest and longer-term prospects were bright.
Nationally, in the three months to March 2008, 157 dairy farms sold, but for the corresponding period this year just 35 sold.
Dairy farms were selling for the equivalent of $42 a kg of milk solids.
Mr McDonald said the last time prices were at that level, the payout was about $4 a kg of milk solids.
"It is concerning to see an apparent lack of confidence among our lenders, leaving the way open for overseas investors to make the most of the improving prospects for dairy.
"It would be a shame to have to rely on Chinese investors to kick start our market again."
The national median farm price for the first three months this year was $970,000, down slightly on the median price of $1.045 million in the three months to February.
In Otago, the median price drop over that same period was sharper, from $1.050 million to $787,500, based on the sales of 17 farms compared with 13 in February and 21 in March 2009.
In the period under review, 57 lifestyle blocks sold with a median price of $380,000, similar to February and March last year.
In Southland, 19 farms sold at a median price of $900,000, the same as for March but a third of the median price in March 2009, which was $2.862 million.
