Fortune favours the brave in the rural property market
When talking Australian farmland prices, people seem to fall into two categories. The first are those who believe prices are already overinflated, unsustainable, and about to go down. The second are entrenched in the “they’re not making any more of it” notion, and firmly of the view that agricultural land will only become more valuable over time.
So, who is correct?
Evidence suggests that rural land prices are underpinned by solid drivers and represent good value on the global market.
Australian farmland prices increased 12.9% last year and the twenty-year compound annual growth rate was 7.6% per annum (Rural Bank’s 2021 Australian Farmland Values Report). While the inflated 12-month growth rate can be partly attributed to post-drought enthusiasm, the twenty-year figure spans numerous drought periods and setbacks due to commodity price changes and external market forces.
Rabobank’s Five-Year Agricultural Land Price Outlook (published September 2021) predicts that land price growth will continue; being boosted by buoyant commodity prices, strong production levels and the low cost of finance.
Furthermore, the Rabobank Rural Confidence Survey indicates around 9% of Australian farmers intend to buy land within the next 12 months. But they are not the only ones keen to buy.
Agricultural land in Australia is relatively cheap compared to overseas, and this is supported by the attractive exchange rate which is sitting at about US0.74 at the time of writing.
According to the Savill Global Farmland Index 2020, the average Australian farmland price per hectare is roughly the same as Canada and Romania; but a long way behind Germany, New Zealand, Ireland and the UK. Whether you agree with our government’s foreign ownership policy or not, the truth of the situation is that we have both domestic and foreign investors in keen competition.
A lack of supply is contributing to price increases. After peaking in the 2019 drought, the number of properties on the market has decreased in 2020 and 2021. There are competitive times ahead for those wanting to buy!
At a local level in the northwest of NSW, farmers and pundits alike are showing extreme confidence in the rural property market. We are seeing incredible interest in livestock and cropping properties.
When everything is considered, the price of agricultural land in Australia is only likely to go one way, and that’s up. It represents an attractive investment to investors and is supported by strong drivers. Now is not the time for the indecisive or faint-hearted.
by Michael Guest in Latest News
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