Australian farmland values hit new record in 2022: Rural Bank

Growth in the value of Australian farmland remained strong in 2022, as the median price per hectare across the country increased by 20 percent to reach a new high of A$8,506 ($5,647; €5,218).

This matches the growth seen in 2021, where values also increased by 20 percent to hit A$7,087 per ha, according to Rural Bank’s Australian Farmland Values 2022 report.

Rural Bank said this was the ninth consecutive year of growth, during which time the national median price per ha has risen by 167 percent at a compound annual growth rate of 11.5 percent. The CAGR over the past 20 years is 8.5 percent.

A range of factors combined to ensure price growth remained strong. Growth in commodity prices was especially strong in 2022, particularly in the first half of the year, helping to increase the buying power of farmers. Some of this gain was offset by higher input prices, Rural Bank said, but not enough to have a significant detrimental impact.

Demand was also spurred by continuing above-average rainfall conditions across most Australian agricultural regions in 2022, with the 12-month period ending as the ninth-wettest year on record according to figures from the Bureau of Meteorology.

Interest rates did begin to move upwards in 2022, which Rural Bank said has probably taken some of the heat out of the market and reduced competition for assets, but rates are still relatively low by historical standards.

Rural Bank said the key drivers of farmland values “are set to remain in favor of demand exceeding supply in 2023, driving a tenth consecutive year of growth in the national median price per ha,” although it predicted that growth would be lower than in previous years.

Another factor supporting 2022’s strong growth was a sharp fall in the volume of transactions, which fell by 34.3 percent year-on-year to 6,588. “This was the lowest level of transactions in the last 28 years, a sudden reversal from 2021 which was the highest transaction volume since 2007. The decline in 2022 more than offset the 40 percent increase in transaction volume between 2019 and 2021,” Rural Bank said in its report.

South Australia was the only Australian state or territory to record an increase in transaction volumes (up 5.9 percent), with all others seeing a decline. The largest drop in volumes was in Victoria, which saw volumes tumble by 44.6 percent.

‘Further growth expected’

All regions of Australia recorded year-on-year growth in the median price per ha for the third consecutive year, Rural Bank found.

The Northern Territory saw the biggest growth in percentage terms, an increase of 108.3 percent that saw the median price per ha, although there were only nine transactions in the calendar year.

Otherwise, the strongest growth was seen in Tasmania, where the median price per ha increased by 54.9 percent to reach A$22,812, largely thanks to a higher proportion of smaller, higher-value transactions in the state’s south.

All others states recorded strong growth, with the median price per ha increasing by 26.3 percent in Victoria, by 23.0 percent in South Australia, by 22.5 percent in Western Australia, by 18.9 percent in Queensland, and by 15.9 percent in New South Wales.

On the outlook for 2023, Rural Bank said: “There is still appetite and ability to continue expansion and acquisition following strong farm incomes in 2022, however some buyers are expected to return to consolidation and take some competition out of the market. Recent high farmland values, lower commodity prices and a drier seasonal outlook may also prompt some additional supply on the market as these conditions will for some, indicate a prime opportunity to exit the industry.

“On balance, further growth in farmland values is expected in 2023 but the rate of growth will likely be much lower than the previous two years as key drivers of growth have shifted to less favorable settings.”

Commenting on farmland values more broadly recently, LAWD senior director Col Medway told Agri Investor: “I don’t think there will be any retreat in values. Buyers who hang around waiting for things to get cheaper will be very disappointed.

“With the balance sheets of vendors today, which are immensely better than they were [during the last major downturn] in 2008, I just don’t see values declining.”