Some farm-sale agreements are not settling as land prices continue to fall and lenders tighten up credit.
Land prices have fallen 20% in the past six months and some analysts predict they could fall another 10% as dairy farmers, who have driven the market for the past few years, adjust to lower incomes.
Andrew Watters, a director of farm investment company MyFarm, said that in the past six months, South Island dairy farm prices had fallen $5 a kg milksolids (kg/ms)-$7(kg/ms), from just over $40kg/ms to closer to $35kg/ms.
He believed they could fall to $30kg/ms.
His comments were supported by the National Bank.
In its Rural Report publication, it said farm land prices had fallen 20% in the past year, returning to June 2005 levels at $12,000 a ha.
They peaked last year at $15,100 a ha.
Sources say the price of top, well-located properties had fallen 10%-15%, while poorer quality farms in less desirable locations had eased about 20%.
Prices had not been helped by several forced sales, where financiers had encouraged heavily indebted farmers to sell, and an end to 100% mortgages.
The decline in sales illustrated how dairy farmers in particular had put away their cheque books.
In the three months to April 2007, Real Estate Institute of New Zealand (REINZ) figures show 575 farms were sold, rising to 786 for the corresponding period a year later.
They fell to 266 in the three months to April this year.
In Otago, sales peaked at 66 in the three months to April 2008, but fell to 25 for the corresponding period this year.
In Southland, the decline was even more marked, the comparable figures being 103 and 16.
Mr Watters said demand for dairy products and low asset prices meant the next six to 12 months was the ideal time to buy a farm.
Interest rates were low and prospects for the industry in the medium to long-term were promising.
However, cashflow was poor and credit tight.
It was also doubtful whether converting sheep and beef farms to dairying added up financially, meaning buying pressure was coming off sheep and beef farms, he said.
"At this part of the cycle, dairy farmers are looking to reduce costs."
Mr Watters' company was looking at investing in its first lamb finishing farms for that reason - strong underlying demand and low asset prices.
The National Bank report said that for most farmers, land-price fluctuations were irrelevant because they were not buying or selling.
But it was critical if the owner was a recent buyer or if debt was high and cash constrained.
"Much of the increase in net worth was an extraordinary capital gain on assets over the past five to 10 years, driven by almost everything else except cash return on capital.
"The magnitude of the fall in asset values should shift the focus to the return on investment, with more emphasis on cash and less on capital gain."
REINZ national councillor and rural spokesman Peter McDonald said there was still confidence in the dairy industry, evident by a late rally in sales and prices in recent months, and because prices had been adjusted from their peaks.
