The median sale price of southern farms has fallen significantly in the past year, substantiating anecdotal evidence that dairy farmers have put their chequebooks away.
For the past few years, dairy expansion has underpinned the price of farmland, but a sharp reduction in the milk price and high debt among farmers has led to a price correction and a slowdown in activity, evident from the latest Real Estate Institute of New Zealand (REINZ) figures.
The median farm sale price in the three months to August 2009 in Otago was $937,500 and in Southland $1.2 million.
The comparable figures in 2008 were $1.8 million and $1.95 million.
A comparison of July and August sales figures shows Otago farm prices rose from $875,000 to $937,500, with 12 farms selling.
In Southland, the comparable prices were steady at about $1.2 million, with nine farms selling.
The data also reveals the edge has gone out of supply and demand.
Otago sales in the three months to August fell from 55 in 2008 to 12 this year, and in Southland over the same period from 91 to nine.
Nationally, over that period, the median farm sale price has fallen from $1.7 million to $1 million and the number of farms sold from 516 to 183.
Dairy farms appear to have taken the brunt of the decline.
The national median price has more than halved, from $4.65 million to $1.956 million, while finishing farms have fallen from $2 million to $1.125 million, forestry land from $207,000 to $108,000 and grazing properties $1.5 million to $990,000.
REINZ national councillor and rural spokesman Peter McDonald said August and September were traditionally quiet times for farm sales, but he hoped rising milk powder prices would translate into confidence returning to the dairy sector.
But the sector is being driven as much by banking policy as by the milk price.
Sources say banks have been more particular in their lending, some working with heavily indebted clients to ensure they stay in business.
"Banks have a strong hand to play in the rural market," said Mr McDonald.
"I hope we will see a little more thought going into bank lending, with a greater emphasis put on good budgets rather than on equity."
Otago lifestyle properties remain in demand, but values have fallen, with the median price $315,000 in the three months to the end of August compared to $446,000 for the same period a year earlier.
