Total farm sales in New Zealand slumped more than a third to 46 in the month of January from the same month a year ago, Real Estate Institute (REINZ) figures show.
REINZ President Peter McDonald said it was "most alarming" that only 7 dairy farms were sold in the 'prime'
month of January and he cited weak bank lending rather than a lack of demand from buyers.
"There is confidence amongst buyers in the rural sector and a lot of interest in farms, but there appears to be a distinct lack of confidence from lenders," he says.
Reserve Bank figures show bank lending to farms dropped NZ$315 million to NZ$46.916 billion between the end of September and the end of December. This was the first fall in agriculture lending in 9 years. See the interactive chart of agriculture lending growth here.
The Reserve Bank warned banks last year about lending too much to the farming sector and many of the rural banks have tightened their lending criteria in the last six months, partly because the banks are more exposed to farming debt and because of an international push for banks to hold more capital and be less leveraged.
This is the end result of the need internationally to de-leverage economies, including New Zealand's.
Interest.co.nz understands that National Bank, the largest rural lender, is reducing its agriculture lending. Only Westpac, BNZ, and to a lesser extent ASB, are still growing rural lending. Responding to an earlier update of this article that said Rabobank was reducing lending, Rabobank said it had "significantly increased" lending in 2009 and aimed to continue growing in 2010.
"We have experienced strong business growth in recent years, and retain an ambition to continue building our lending to quality New Zealand farming businesses," Rabobank New Zealand General Manager Ben Russell said in an emailed statement.
Responding to our earlier report that Westpac had stopped lending growth, Westpac Public Relations Manager Liz MacIntyre said Westpac was still growing its rural lending.
"We're very clear that we see the industry as a focal point for the New Zealand economy, and we have recruited an extra 20 agribusiness managers over the last year. Our message over the last year has consistently been that we're open for business, and we've communicated that constantly to the rural sector," MacIntyre said in emailed comments.
Westpac's Head of Agribusiness Dave Jones said Westpac's lending was growing consistently faster than other banks across all major rural areas and one lending experience would not determine the bank's lending policies across the sector.
"We've grown 2.25 times national system growth in rural lending in the last 4-5 months," Jones told interest.co.nz, adding the growth had been 1.5 times the system's growth over the last year or so.
The total farm sales of 46 in the month were the lowest since 2003 when interest.co.nz started recording the REINZ sales data. They were down from 73 in January 2009 and 195 in January 2008. Dairy farm sales were down from 12 in January 2009 and 48 in January 2008.
INTEREST.CO.NZ