Loan Purpose

Farmland surges 25% in 12 months

The value of Australian farmland has surged in the last 12 months on the back of higher demand, strong conditions and low interest rates.

 Rabobank’s Australian Agricultural Price Outlook shows that agricultural land prices across Australia rose by 27% in 2021, with double digital growth recorded in all states.

 According to the report, there are a range of favourable forces that have encouraged the growth of agricultural land prices in 2022 after significant growth last year.

 Similar growth has been observed in 2022 so far, with a 25% rise recorded and 30% estimated for the full year.

 The biggest increases in farmland prices in 2021 occurred in Victoria and Queensland, with Victorian cropping land increasing by a massive 78% and grazing land by 42%.

 RaboResearch report author and Australia & New Zealand General Manager Stefan Vogel recently provided the following commentary:

  Australia has outpaced many other countries in recent years when it comes to growth in agricultural land values.

 The growth has been driven by a very positive constellation of factors, including strong agricultural commodity prices and good production volumes enjoyed by many in the nation’s farm sector, which have bolstered farmers’ cash reserves and driven demand for land purchases.

 For multiple years in a row, the macro settings have been exceptionally favourable for land purchases.

 Prices of most major agricultural commodities hit or moved close to record highs, widespread rainfall has supported Australian production with interest rates having been at record lows.

 Farmland prices are forecast to slow down beyond 2023, driven by higher farm operating costs and lower farm incomes expected in comparison with recent buoyant conditions.

 The tide is turning slightly as the land market needs to take a breather after the staggering growth over the past 18 months.

 There is also the likelihood of agricultural commodity prices and production volumes in coming years falling short of the exceptionally high or even record levels seen in 2021 and the first half of 2022.

 Vogel went on to comment that a shortage of land on the market has been a leading driver of record prices.

 Buyers have been prompted to enter the market earlier than they had planned not knowing when an opportunity may arise again, and, in some cases, entering expressions of interest for a property that were much higher than the productive value might justify to secure the purchase.