Rural property flat but for how much longer?

Rural property flat but for how much longer?

Two consecutive winters of a difficult rural property market has seen continued low volumes but change may be in the air, First National Group says.

The Group’s quarterly survey to mid September shows access to funds is continuing to limit rural sales, and the majority (90%) of the network’s rural agents report continuing tight lending criteria discouraging buyers.

First National Group general manager John Stewart said at the same time last year, it was the low payout prediction that caused a hiatus in the market, accompanied by concern over economic conditions.

“The rural market is still suffering but for different reasons this year. The loss of second tier lenders like South Canterbury Finance and Allied Nationwide Finance has given more power to the main bank lenders, whose tight criteria is yet to loosen in most areas around the country.

“Banks will claim they are reasonable but the sheer number of buyers losing hope at preliminary enquiry with their bank shows that in reality, access to funds has not improved to degree being claimed.

“Many agents are saying buyers are jumping through twice as many hoops with lenders’ requirement for building reports, valuations, and tough cashflow criteria. For many who are seeking funding, the amount the banks will allow them to eventually access is insufficient for purchase, discouraging formal application.

“While financial institutions are to be commended on seeking to reduce their risk, they are among the few commercial operators in the country reporting substantial profits.”

Another reason agents reported buyers in some areas were not purchasing was an expectation that the bottom of the market had not yet been reached, creating a stand off between vendors and buyers, Stewart said.

As a result of these two main factors, rural sales volumes for the Group were only slightly above the same time last winter, which had been half the volumes of winter 2008.

“However there are some signs that for dairy farmers at least, some increased cashflow may be in sight. Fonterra’s milk solids payout prediction announced today was $1.60 higher than September 09.”

Some First National agents reported dairy farm owners in Canterbury who had planned to sell in spring had taken their properties off the market due to the prospect of higher cashflow.

First National in Taranaki is preparing for a busy spring with at least six dairy farms to go to tender in the next two weeks.

In terms of farm sale method, tender was currently more popular than auction due to lack of cashed up buyers and the ability for buyers to add conditions to the sale and purchase agreement.

ENDS

© Scoop Media