The value of Australian farmland continued to grow in 2021, with the median price per hectare crossing A$7,000 ($4,904; €4,667) per hectare for the first time.
The figures were laid out in Rural Bank’s Australian Farmland Values 2022 report, an annual assessment of farmland values in the country based on farm sales data collected by the official government entity in each state and territory.
The median price per hectare in 2021 stood at A$7,087, an increase of 20 percent on the 2020 figure of A$5,907.
Rural Bank’s figures show that 2021 was the eighth consecutive year that the median price per hectare has increased, rising by 123 percent over that period. The 20-year compound annual growth rate now stands at 8.4 percent, also an increase on last year’s figure of 7.6 percent.
The strongest growth was in Western Australia, which saw the median price increase by 36.3 percent, followed by Queensland (an increase of 31.3 percent) and Victoria (30.4 percent). This was only the third time since 1995 that an increase of more than 30 percent had occurred in more than one jurisdiction in a given year. The Northern Territory was the only state or territory to see values decline, falling by 18 percent.
Rural Bank also found that the number of farmland transactions had increased by 22.5 percent to 10,032, the largest increase in transaction volume in the past 27 years.
Strong commodity prices, a second consecutive year of favorable weather conditions in most areas and continuing record-low interest rates had combined to send values higher from what were already record levels, said Rural Bank general manager sales, partnerships and marketing Simon Dundon.
“Strong demand has made the market for farmland incredibly competitive. We have seen many farmers looking to acquire neighboring blocks to expand the scale of operations or looking to regions further afield to diversify their landholdings, meaning that many properties are fiercely sought after by multiple cashed-up and competing buyers,” he said.
“Median prices increased to new record highs in every state, except the Northern Territory, with the supply of land on the market also increasing. Overall, the strength of demand exceeded the rise in supply to drive prices higher, with some regional exceptions.”
Dundon said that signs of caution are starting to emerge among buyers, though, as the macroeconomic landscape slowly begins to change.
“The prospect of higher interest rates and margin challenges from higher input costs could dampen demand and slow the rate of growth in property values. The strong rise in values in recent years will make some properties unaffordable for a number of farmers – and unviable as stand-alone operations, which should not be ignored, as it acts as a barrier to new entrants to the industry.”
Despite this, Dundon added that 2022 was likely to be another strong year for Australian agriculture and that the sector’s long-term fundamentals “remain strong,” and farmland values would probably be higher again in 2022.