Rural property market catches fire

Double digit gains for rural property as all states record gains


There were no weak spots in a recent Rural Bank report on farmland prices, with national prices gaining 12.9pc and all states in the black.

CONFIDENCE: Rural Bank's Will Rayner says confidence is high in all sectors in the rural economy, leading to rising land values.

CONFIDENCE: Rural Bank's Will Rayner says confidence is high in all sectors in the rural economy, leading to rising land values.

WHETHER it be dairy farms in Gippsland, Victoria, station country in the northern territory or cropping ground in Western Australia, agricultural land was in high demand right across the nation in 2020.

According to Rural Bank's annual Australian Farmland Values report, issued this week, found a whopping 12.9 per cent median price per hectare increase for 2020, the seventh consecutive year of growth.

Just as remarkable as the headline number was the evenness of the growth, with all Australian states experiencing growth in agricultural land prices, the first time this has happened in 15 years.

The price rises were achieved also with markedly more land for sale, with a 14.5pc year on year increase in transaction volumes, meaning 8.2 million hectares, with a combined value of $10 billion, changed hands.

Rural Bank chief operating officer Will Rayner said the industry was in a buoyant mood in most sectors.

"You've got great growth in red meat, grain prices look good, there is water for horticulture, things are well set up," Mr Rayner said.

"This is the reason we are seeing this demand right across the board," he said.

And it is not only geographically diverse demand, but mixed in terms of size.

"There were big sales and small sales with demand ranging from neighbouring family farms to global and corporate investors, there was no particular trend in terms of who was purchasing and what they were after," Mr Rayner said.

He said the strong results, against the backdrop of the COVID-19 pandemic, highlighted the resilience of agriculture.

"It was one of those sectors that just kept going throughout the pandemic."

In spite of issues with drought, over the past 20 years, Australian farmland has performed amazingly, with a compound annual growth rate of 7.6pc.

Tasmania led the charge, with a record year for growth, 25.3pc, followed by Western Australia, 19.3pc, New South Wales 15.6pc, Queensland, 11.8pc, South Australia, 10.9pc, and Victoria, 6.9pc.

Alexandra Gartmann, chief executive of Rural Bank, said low interest rates had played a part in the rural property boom, along with the solid commodity prices.

"Low interest rates and consistent commodity prices, coupled with exceptional seasonal conditions throughout 2020, have provided farmers with capital and an incentive to invest," Ms Gartmann said.

In spite of a slight disconnect between the appreciation of farmland and a rising commodity price index, Mr Rayner said it was manageable.

"It would be different if the commodity prices were falling and we were still seeing this appreciation in land, but the two remain broadly consistent and the low interest rates provide a bit of relief in helping manage the gap between the two."

Ms Gartmann said the gap was widening and said farmers looking to expand combined with a smaller pool of sellers were contributing to the pattern.

"Many farmers are seeking to expand and this, combined with a smaller pool of sellers, has resulted in strong competition for property," she said.

"Experienced buyers with clear heads and an eye on the longer-term will also weigh up geopolitical risks and their potential impact on commodity prices.

"But even with these risks in mind, it appears that high values for quality farmland will continue to be supported in the short to medium term", she said.

Mr Rayner said he did not see any potential drop in land values but said there could be a plateauing of prices.

"It might be that we'll enter a period of price consolidation and that the industry takes a bit of a breather."

However, he said current investment levels were healthy, with no immediate risk of a property bubble.

"The prices remain closely linked to commodity prices and the banks, that provide the bulk of the funding for the purchases, are taking a long term view and that the industry has the balance sheet to withhold periods of volatility."


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