Australian farmland capital growth dips below 5% – ANREV

Capital growth of Australian farmland fell to 3.7% in Q2 2022, with permanent farmland seeing asset values fall on an annualized basis.

The total return on investment in Australian farmland was 10.21 percent on an annualized basis to the end of Q2 2022, one of the lowest figures recorded by the ANREV Australian Farmland Index since its inception in December 2015.

The index, compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles, found that income returns held relatively steady on an annualized basis at 6.32 percent, but capital growth dipped to 3.7 percent, falling below 5 percent since rallying after the last dip in 2021.

The total annualized return in Q1 2022 was 14.68 percent, while the total return in the same quarter in 2021 stood at 15.07 percent.

The Australian Farmland Index has only recorded a total annualized return lower than this quarter’s figure on three occasions: in Q4 2015 when it stood at 8.97 percent; in Q1 2016 when it stood at 8.09 percent; and in Q1 2021 when it stood at 8.46 percent.

The quarterly return for Q2 2022 stood at 4.54 percent, comprising an income return of 0.81 percent and capital growth of 3.73 percent.

Annual cropping again strongly outperformed permanent farmland in the index’s properties, with the total annualized return for annual crop farmland standing at 18.09 percent, comprising capital growth of 10.55 percent and income returns of 6.89 percent. Permanent farmland returned 5.6 percent on an annualized basis, comprising an income return of 5.87 percent and negative capital growth of -0.29 percent.

In commentary on the index, Rural Funds Management said: “Throughout the year many of the agricultural commodities produced by Australian farmers have benefited from increasing global demand, higher prices and favorable growing conditions. This is perhaps best evidenced in the significant increase in the value of agricultural exports which rose to a record A$67.5 billion ($45.1 billion; €45.2 billion) for the 12 months ended 2022 – up from around A$50 billion the year prior.

“A lower Australian dollar has also benefited producers generally, with a significant amount of Australian agricultural produce exported.”

The firm added that the past few months have seen some moderation in all-time-high commodity prices, but that they remain strong from a historical perspective.

The Australian Farmland Index tracks the performance of 40 farmland properties with a market value of more than A$1.8 billion. Data is contributed by Argyle Capital Partners, Aware Super, Growth Farms Australia, Gunn Agri Partners, Manulife Investment Management, Timberland and Agriculture (formerly known as Hancock Agricultural Investment Group), Riparian Capital Partners and Rural Funds Management.