MEDIAN land prices in Victoria jumped by 27.8 per cent last year after a massive 40 per cent rise the previous year, according to Rabobank, with all regions continuing the positive trend in land value growth.
Nationally, Australian agricultural land is on track for another year of strong price growth in 2023, agribusiness banking specialist Rabobank says in its newly-released annual Australian Agricultural Land Price Outlook.
The report, supported by farmland sales data from DAS (Digital Agricultural Services), says three consecutive seasons of good financial performance for Australia’s farm sector – driven by high commodity prices and good weather conditions for most of the country – is set to once again fuel “double digit” percentage growth in agricultural land prices for the year ahead, albeit easing from the record near-30 per cent increases seen in both 2022 and 2021. The DAS data set comprises genuine rural sales and excludes lifestyle and non-market transactions.
In Victoria, the value of grazing areas rose by 24.7 per cent to $21,725 per hectare, while arable farmland was up 29.8 per cent, reaching an average of $13,577/ha, the second-highest value in the country.
Dairy areas increased by 13.8 per year-on-year, with an average price of $19,297/ha.
“Regions that are close to urban centres and have a mix of urban sprawl and rural markets, demonstrate the impact of city-dweller demand for farmland,” Rabobank said. However, buyer behaviour in dairy was “not as robust as in recent times and major discounts are taking place for large-scale farms valued at over $10 million”.
Elders rural property update 2022 found that the median price per hectare in Victoria eased by six per cent in the final quarter, driven by mixed performance across regions with Gippsland and South Central contracting.
Transaction volumes increased sharply by 17 per cent in the quarter, particularly for larger parcels in the Wimmera-Mallee and South West.
In the calendar year, prices rose by 22.5 per cent to $12,937/ha, the second consecutive year of growth above 20 per cent.
This was driven by volumes declining sharply by 45.9 per cent to a total of 722.
Most of the decline occurred in the larger parcel size range. “This shifted transaction mix towards higher priced smaller parcels,” Elders said.
In the last quarter, Victoria’s median farm price fell by six per cent to $14,256/ha, whereas comparing the last quarter of 2022 to 2021, the median price was up 13.3 per cent.
There were 186 transactions in the last quarter, up 17 per cent on the previous quarter but down year-on-year by 35.2 per cent
The bank’s analysis – of shows agricultural land prices across the country rose by 29 per cent (median price per hectare) in 2022, with cropping land increasing by 29 per cent, livestock grazing land by 26 per cent and dairy by 29 per cent.
Agricultural land prices were found to have recorded double digit percentage growth on the previous year in all states, with South Australian farmland prices rising the most – at 34 per cent.
Report author, RaboResearch agriculture analyst Vitor Pistoia, said agricultural land prices across the country had soared again in 2022, with the “macro settings” having been favourable for land purchases and farming profits in Australia.
“Prices for most major commodities reached record highs, widespread rainfall supported agricultural yields – which also surpassed historical records in some regions – and interest rates were at historical lows for almost half the year,” he said.
While a decline in agricultural land prices is not forecast, the bank cautioned that – after the estimated double digit percentage price increase this year, a big slowdown in the “pace” the massive price growth in “massive” in recent years is expected from 2024 potentially through to 2028.
Mr Pistoia said “farmland sale prices in early 2023 were still setting new records”, with prices in 2023 expected to continue to rise.
“Albeit to a lesser extent to the previous year as the combination of high property prices and increasing interest rates – along with the expected onset of El Nino, and potentially drier weather for many parts of Australia, which may hamper agricultural yields – will be impacting farmers’ appetite for buying land,” he said.
Mr Pistoia said the income outlook for Australian farmers in 2023-24 was “solid and positive”, with above-historical-average prices for agricultural commodities still granting good profitability and recent high costs for farm inputs now easing.
However, looking out from 2024 to 2028, he said – with the record highs for agricultural yields and commodity prices seen in the past three years unlikely to be repeated – there were expectations of a slowing pace in the growth of land prices, although with no price declines expected.
“Commodity prices are likely to remain at good levels for farmers for the next one to two years. However, the drier forecast may result in lower yields and reduced margins, while rising interest rates will curtail long-term investment plans,” he said.
“Currently, cash already available in the system and stocks of grains and livestock ready to enter the market remain the key factors driving land price growth.”
For now, the report said farmers’ appetite for property purchase remained strong, with recent Rabobank research – conducted in the first quarter of 2023 – showing seven per cent of Australian farmers intend to buy land in the next 12 months.
Based on the analysed data, the report found agricultural land deal sizes were increasing. Especially in Queensland and NSW, Rabobank said, where 22 per cent and 14 per cent of sales respectively exceeded $10 million.
“And overall, according to our data set, 11 per cent of cropping and 13 per cent of Australian grazing land sales in 2022 exceeded $10 million,” Mr Pistoia said.