Buyers will struggle to get this kind of land cheaply for the next couple of years across most states in Australia. Australia’s property price boom certainly isn’t stopping at the city limits, with bumper crops and low-interest rates putting farmland at a premium. Agricultural land prices boomed in 2020 and are set to climb for at least the next five years, according to agri-focused lender Rabobank, with a lack of available land on the market setting up a brawl for those who want a slice. Rabobank’s newly-released Agricultural Land Price Outlook shows all states, barring NSW and South Australia, enjoyed double-digit growth in median value per hectare as the nation’s rural sector enjoys an economic sweet spot.
The value of Australian farmland grew by an average of 6.1 percent in 2020 to a median of $5552 per hectare, with several states enjoying a far more impressive growth rate. Rabobank said Tasmanian farmland jumped by 28.3 percent in value to a median of $15,999 per hectare, and Victorian farms grew by 15.8 percent to $10,981. Meanwhile, Queensland agricultural land improved by 15 percent to $2734 per hectare, and farms in Western Australia are worth 14.1 percent more than in 2019 at $3244 per hectare.
“Not in the last 30 years have the macro settings been so supportive” of agricultural land price growth, the new report says, with prices of most major agricultural commodities either at or near record levels thanks to short supply outside China and a dramatic economic rebound from Covid-19. Generous recent rainfall supports future growing conditions, while a lack of supply also makes agricultural land prices higher. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects the value of farm production to reach $73 billion in 2021/22, an impressive 8 percent above last year’s $68 billion records and 17 percent above the five-year average.
With 45 percent fewer sales recorded in 2020 compared with 2019 – and interest from both onshore and offshore buyers remains strong – prices are tipped to accelerate through 2023 and peak in 2026. “We think it’s likely that commodity prices will remain supportive for the next 24 months, while we expect interest rates will stay at record lows until at least 2024,” Rabobank senior analyst and report author Wes Lefroy said. “For land price growth to reduce fast than our base case, or even for a downward correction to occur, we would need to see a multi-year interruption to a combination of commodity prices, production, or interest rates.”
Mr. Lefroy says buyers are still likely to take a tilt despite the price surge, with farmer purchasing intentions at their highest in at least the past five years. “Many buyer’s pockets are lined with cash surpluses which, alongside record-low interest rates, has boosted purchasing power,” he said. And while markets are tight, they are not all equally fast. “Not all regions have seen prices rise at the same pace, and while demand continues to outweigh the number of properties on the market, the demand-supply balance is not the same in all regions,” he said. “For those buyers who do their homework and have the flexibility within their business to seek inter-regional purchases, there may be greater productive value to be had for their capital investment,” he said.
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