Farke revealed Joseph's demand after their friendly win against SC Verl.
Spain U21 striker Joseph has attracted interest from Real Betis and Celta Vigo in recent days.
"It was actually the plan to have him here (in Germany)," said Farke. "With him the situation is quite clear. We really value and rate him otherwise we wouldn't have played him, especially in the beginning of the last successful campaign ahead of a golden boot winner in Joel Piroe and an experienced striker like Patrick Bamford.
"He had 39 appearances last season and double figures, when it came to starting in the Championship. When you do this with a 20-year-old guy, it's because we believe in him, trust him and back him. It's a sign of how much we value him and what we see in him.'
"Nevertheless, he came to me and asked for a new challenge and would like to move. He has also hinted that he prefers a move to Spain due to his Spanish roots. That was his call and that's ok.
"We want players who are excited about the project to play with Leeds United in the best league in the world and who want to be here with us and successful with us. I won't stand in the way because I want players who are buzzing to represent this club. For that I've said 'OK' to Mateo, I accept this and won't stand in the way."
I don't like it
However, Farke also admits he's disappointed with Joseph's decision.
He continued: "On the other hand, we as a club have invested a lot in him - time, money and backing. He's on a long-term contract and we value him. This is for our key people and the board to decide the value. The truth is that no other club has met our expectations yet.
"Because of that, we expected him to train and travel with us. He mentioned that he didn't feel ready for the trip to Stockholm. I accepted this because he started later with training. The day after, he said he didn't feel ready to travel to play the friendlies here in Germany.
"It's not a situation I like. I've spoken honestly to him and strongly recommended him to be professional but he said he's not in a mental state to do this. What should I do? I can't call the police to drag him here on the training pitch. It was his decision and for that, he is still in England."