Farm prices to fall a further 10pc - economist

Latest figures show that the rural property market remains subdued. Photo / Supplied

Rural property prices could fall a further 10 per cent in the next year, as sellers are forced to drop their asking prices to meet buyer expectation.

Latest REINZ figures show the rural property sector remains subdued, with flat prices and low turnover continuing to affect the market.

Nationwide farm sales halved in the three months to June when compared with the same time two years ago, while prices have plummeted by more than 40 per cent.

In the three months to the end of June 302 farms were sold, an increase on the 285 sold during the same period last year, but well down on the 711 sold in the three months to June 2008.

Meanwhile the median sales price remained steady at $1,035,000 for the three months to June, when compared to earlier in the year, but is still well down from the $1,155,000 recorded in the three months to June 2009.

Economist Cameron Bagrie said while the medium term outlook for farming was good, there remained a "disconnect" between what sellers wanted for their land, versus what buyers were prepared to pay.

"Buyers want to pay x based on yield and cashflow, while sellers want a reasonable capital gain," he said.

"You've got to see movement from both sides here."

Bagrie said he expects prices to fall by a further five to 10 per cent as result.

Real Estate Institute rural sales spokesperson Murray Cleland said Bagrie had got it about right.

"We need to see a slight drop in prices."

"If people want to sell, they needed to lower their expectations."