Strong Australian farmland prices could see ‘slow unwind’

Australia’s rural land market continues to see rising prices, but could be in the run-up to “a slow unwind”, according to real estate agents Herron Todd White.

Tim Lane, the national director at the estate agent, said:“The current conditions are not unlike those in the early 2000s where an increasing sales volume and price movements were supported for a further two to three years before levelling out and then the global financial crisis hit and a slow unwind occurred.”

In the meantime he said prices would continue to increase, albeit at a slower pace than over the last two years.

The agent also warns of change in the water title market. The recent abundance of rain in southern and western Australia could bring down prices over the short term.

“If the planting window does open with some dry weather one would expect large irrigation area planting to occur on very full moisture profiles,” said Lane. “It will then be interesting to see the market impact on water values both permanent and temporary.”

Water title values have risen quickly in the last five years, with investors getting high returns from higher-value usage strategies and strong prices in dry years.

The Victoria Superannuation Fund’s chief executive Michael Dundon told Agri Investor in August that its water strategy as part of the Future Fund had been yielding around 9 percent compared with 5 to 6 percent for the vehicle as a whole.