Record Land Values - Will They Continue?

The NSW Valuer General (1) found that rural land values increased by a whopping 26.0% in the 2021 financial year. The high prices have continued into this year with Rural Bank (2) reporting that commercial farmland prices have increased for the eighth year in a row to a record national median price of $7,087 per hectare, an increase of 20% in 2021.

The NSW Valuer General put the growth down to continued strong agricultural commodity prices, limited supply and sustained demand for good quality farming, mixed cultivation and grazing lands. Rural Bank suggested the high land values were mainly driven by stronger commodity prices, a second year of favourable conditions and record low interest rates.

Rural Bank’s Australian Farmland Values report is based on every farmland transaction across Australia. The in-depth data excludes lifestyle farms to give a more accurate picture of trends in commercial farming property. The report showed that every State and Territory in Australia except the Northern Territory experienced record farmland values. The growth was mainly in Western Australia, Queensland and Victoria (all above 30%), with South Australia, New South Wales and Tasmania growing less than 10%.

For Australia generally, Rural Bank is positive regarding continued growth in 2022, although they predict that rising interest rates will have an effect on all regions. Rabobank (3) agrees, predicting an 8% rise in land values in 2022 and a 5% rise in 2023, as well as another profitable year (4) for Australian agriculture.   

However I feel that interest rate rises will have a minimal effect on agricultural asset values as farmers would prefer to pay interest rather than tax.

The biggest bearing on prices will be input costs and biosecurity.  Input costs are being substantially increased due to the war in Ukraine, COVID supply chain issues and the energy crisis in Australia.  The threat of Foot and Mouth Disease coming over from Indonesia is a substantial risk and would be devastating for Australian livestock industries. 

At Rural Property NSW we have strong buyer enquiry across all mainstream agricultural assets and we expect this demand to continue. Whether it will result in the continuation of land value increases in excess of 20% is yet to be seen.

Michael Guest

References

1. Report on NSW land values at 1 July 2021. NSW Valuer General. 

2. Australian Farmland Values 2022. Rural Bank. 

3. Rabobank Agricultural Land Price Outlook 

4. Rabobank 2022 Industry Outlook 

Posted on Monday, 13 June 2022
by Michael Guest in Latest News
Rural Property NSW Ukraine commodity prices farmland values livestock market rural land
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