Waikato farm finance experts are cautiously welcoming a new guide to farm sale price changes, developed by the Real Estate Institute of New Zealand (REINZ) in conjunction with the Reserve Bank.
REINZ said the new index was designed to track price movements more accurately, by adjusting for property-specific factors such as location, size and farm type.
“The REINZ Farm Price Index is less influenced by the type of farms that happen to sell, providing an improved measure of underlying farm prices," said REINZ rural market spokesman Brian Peacocke.
The index will take into account macro-economic variables which typically account for a third of the price trend movement, he said. The variables include interest rates, exchange rates, commodity prices, farm input prices and other items not directly linked to a property's location, size or farm type.
The index could be interpreted as a timely indicator of market sentiment on investment in farm land, Peacocke said.
Peter Hexter, a director at Morrinsville and Matamata accountants CooperAitken, said the new approach of standardising farm sale prices would make it possible to compare farm prices on as close as possible to a like-for-like basis.
“This will reduce the need for second guessing of the effect of the various factors on farm prices and result in better decisions being made by all parties,” he said.
Specialist dairy farm accountant Nigel McWilliam, a partner with Morrinsville chartered accountants Diprose Miller, has conditionally welcomed the index. “Access to more information is always helpful to the market.
"People will be better informed in making decisions, but at the end of the day it is still a very broad guide.
"Individuals still need specific comparable sales in any buying or selling decision. Discussions in these matters with local agents or valuers is always the best guide,” he said.
REINZ said the index would be first published with the monthly data release beginning next month, with reporting for the three months to the end of July 2012.
REINZ said it would continue to publish median price per hectare each month, as it was a common measure used by many farmers to assess the initial value of properties. But median price per hectare may tend to understate the actual values of properties being sold.
- © Fairfax NZ News
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