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Farmland values have set a new record following what the Rural Bank has described as “a near-perfect mix of ingredients” that combined to drive demand.
The bank’s general manager of sales partnerships and marketing Simon Dundon explained: “Stronger agricultural commodity prices coupled with a second consecutive year of favourable seasonal conditions in most areas improved cashflows and strengthened balance sheets, with support from record low interest rates and confidence in the long-term outlook for the agricultural sector all combining to see a surge in the buying power of Australian farmers.”
The Rural Bank’s annual Australian Farmland Values report found that over the course of 2021, a total of 10.8 million hectares of land traded at a record-high combined value of $15.6 billion. That equates to an area larger than the landmass of Portugal.
Landholders were encouraged to capitalise on strong market conditions, selling in force and pushing transaction volumes up 22.5 per cent in 2021 – the largest annual increase seen in 27 years.
Mr Dundon noted the figures out of 2021 represent a new pinnacle for growth in the sector.
“This is the eighth consecutive year that the national median price per hectare of Australian farmland has increased, in which time it has risen by 123 per cent – driving the median price per hectare to $7,087, an increase of 20 per cent in 2021 alone and lifting the 20-year compound annual growth rate (CAGR) to 8.4 per cent,” he said.
Of the states and territories, Tasmania recorded the highest median price per hectare at $14,730.
But with all markets shifting, signs of buyer hesitancy for farmland have begun to emerge.
“The prospect of higher interest rates and margin challenges from higher input costs could dampen demand and slow the rate of growth in property values,” Mr Dundon said.
“The strong rise in values in recent years will make some properties unaffordable for a number of farmers – and unviable as stand-alone operations, which should not be ignored, as it acts as a barrier to new entrants to the industry.”
Even so, Ray White’s chief economist Nerida Conisbee noted that the agricultural sector’s strength is predicted to outlast the year.
“In 2021, agricultural production hit record highs as forecast by the Department of Agriculture, Water and Environment. In 2022 they forecast that this run will continue with Australian farm production expected to exceed $80 billion after experiencing the sharpest rise ever recorded,” she said.
So, too, will Australia’s newly opened borders support the price of farmland throughout the year.
“One buyer group which has been missing over the past two years may return. International investors are keen on Australian farms and have been relatively quiet since the start of the pandemic. Open borders has the potential to bring them back, and combined with continued strong agricultural conditions, are likely to lead to a continual increase in farm prices,” Ms Conisbee said.
But she also noted that price growth for all properties would moderate in the face of rising interest rates.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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