The growth rate in Australian farmland values has declined significantly in the first half of 2023, as the median price per hectare grew by only 0.1 percent compared to a year earlier to remain flat at A$8,515 ($5,434; €5,135).
This a substantial shift from the previous four half-yearly periods, which each saw year-on-year growth of between 16-23 percent, according to Rural Bank’s Australian Farmland Values H1 2023 report. The median price per hectare for the 2022 calendar year was A$8,506.
Rural Bank said the figures represented “an inflection point” for farmland values Down Under, as the median price in the first half of 2023 fell by 3.9 percent in comparison to the second half of 2022.
On a regional basis, Western Australia recorded the biggest increase in values at 15.1 percent, while Tasmania recorded a -24.7 percent drop for the first half of the year (see map below for further breakdown).
The number of farmland transactions continued to decline in the first half of the year, which fell to its lowest level in the past 28 years, said the report.
“The number of transactions in Australia was 40.2 percent lower than a year earlier and 27 percent lower than the second half of 2022,” said Rural Bank. “This was the fourth consecutive half in which transaction volume declined, a period of which transaction volume has halved.”
Rural Bank said a range of factors contributed to the fall in values, such as “a sudden and sharp decline in agricultural commodity prices in the first half of 2023,” which led to reduced appetite for farmland purchases.
The bank’s commodity price index – which combines indicator prices for major agricultural commodities into one index – recorded a 22 per cent decline across the first half of 2023 and in June 2023 was down 35 per cent from a record high in June 2022.
Drier rainfall outlooks for 2023 “likely saw greater caution enter into prospective buyers’ minds,” said the bank, as “soil moisture has declined well below-average in most parts of New South Wales, Queensland and Western Australia, while Victoria and South Australia are average to below-average.”
Drier conditions driven by an El Niño are also expected to keep appetite for expansion weakened for the remainder of 2023 and into 2024.
Higher interest rates also contributed to weaker demand, said the H1 report. While the rise in interest rates was more substantial in 2022, rising from a low of 0.1-3.1 percent by December, the first half of 2023 saw four further rises to take the cash rate to 4.1 per cent in June.
Victoria and the Northern Territory recorded modest median farmland value increases of 2.9 and 4.2 percent respectively, as a mixed set of property types and values combined to create a modest growth rate.
Meanwhile Western Australia, New South Wales and South Australia experienced the most significant year-on-year median price increases at 15.1 percent, 14.9 percent and 12.9 percent, respectively.
Median prices in New South Wales and South Australia were up across the majority of their respective regions, as a low number of high-value transactions supported prices.
Median price per hectare movements in Western Australia were mixed, with volumes lower throughout all of the state’s six regions, with three recording their lowest half-yearly sales volumes in 28 years.
Tasmania recorded the most significant drop in farmland values at -24.7, as the median price per hectare fell from A$22,812 to A$14,034.
Rural Bank said this decline reflects the low number of transactions in the state, which were mostly low-value grazing properties, rather than being representative of a substantial decline in property values.
The only other state to see negative growth rates was Queensland at -3.1 percent, with the median price falling from A$8,119 to A$7,822.
The median price across Queensland was mixed with an even split of increases and decreases across its regions, but there was a clear trend of easing demand as the number of transactions also fell.