Real Estate Institute sees ray of hope for farm sales

Despite a big drop in prices since 2008, interest in farm sales is starting to pick up as bank lenders return to the market, the Real Estate Institute says.

The median price for a dairy farm for the three months to February was $3.1 million - down slightly on the January period but a dramatic fall of 24.4 per cent on the same time in 2008.

Institute president Peter McDonald said reasonable levels of inquiry for all types of farms did not seem to be resulting in completed transactions.

"Only 11 dairy farms were sold nationwide in the month of February, which remains in line with the decline we noted in January," McDonald said.

The lower volume of sales could influence the median value result and farms sold in February had averaged $47 per kg of milk solids compared to $40 per kg in January, he added.

Last month McDonald said only seven dairy farms were sold during January in what was normally a prime time for such sales and there appeared to be a lack of confidence from lenders, although yesterday he added there were signs of growing support from the financial sector.

"Several of the banks are starting to get into it again and some of them have actually come and approached us and said, 'we do have money available', which is a good sign," he said.

"It wouldn't surprise me to see the turnover lift as we head into the autumn months really."

The Reserve Bank's Financial Stability Report in November said rural land prices had risen beyond sustainable levels until about the middle of 2008 with both buyers and lenders taking an overly exuberant view of prospects in the sector.

"This has created a difficult situation for some of those buyers, and will lead to losses for the lenders in some cases," the bank said.

"The recent lift in some commodity prices and the willingness of lenders to work with troubled operators should help keep the problems contained."