Farm neighbours are responsible for applying the blowtorch to soaring rural farmland prices across Australia, another major report has found.
NAB says neighbour-to-neighbour farm buys under $25 million are the most active segment of the rural property market in Australia.
The median price paid per rural hectare rose by up to 20 per cent over the past year, the bank found in today's release of its first Regional and Agribusiness Horizons report.
One of the nation's biggest rural real estate firms, Elders Ltd, last month also found the white-hot demand for farm land pushed prices up almost 20pc last year from the year before.
Like Elders, NAB has drilled down into rural property sales data to find out what is responsible for the rise beyond the obvious triggers of record commodity prices and low interest rates.
Confident neighbours have been taking advantage of the once-in-a-generation financial conditions to boost their property size, often paying district record prices in the process.
The average value of Australian farms has risen by more than 220pc since 1990.
NAB said it was experiencing record levels of demand for credit.
"Elevated borrowing activity in the regional and agriculture sectors is being matched by record volumes on the other side of the book with NAB's deposits data showing plenty of cash in the system," the report states.
NAB executive (regional and agribusiness) Julie Rynski, said as well as buying neighbouring land, farmers are also looking inter-regionally and even interstate for property acquisitions.
Ms Rynski suggested after a run of La Nina-induced good seasons farmers who were "wary of another extended drought" are diversifying their land holdings across different regions with different weather patterns.
NAB head of valuations Mark Browning said the rise in rural property prices had come without any significant change in foreign investment.
"Foreign Investment Review Board data shows foreign ownership remained steady at just under 14pc in 2021 and at less than 11pc for water entitlements," Mr Browning said.
MORE READING: Elders tips at least two more years of good times.
"Foreign investors and large diversified funds are still participating in the agricultural property market on both sides of the transaction, but growth in activity in this segment has not matched that of owner-operators. As global capital factors evolve in the year ahead, this space may pick up."
Because the forecast is for commodity prices to stay high, the bank's analysts expect the hot market to continue even with added interest rate pressure.
NAB produced an optimistic top 10 it called "regional bloomtime"
- Regional housing valuations rose 23.9pc in the past year (ahead of metro at 14.6pc rise).
- Farmland sale prices are soaring.
- The bank's rural commodities index is now more than 20pc higher than a year ago.
- Wellbeing in rural areas is at its highest since mid-2018, with the regions second, both significantly ahead of capital cities.
- Holidays top the list of expected major household purchases over the next year for all Australians, with the regions expected to benefit.
- Demand for agricultural loans was up 18.6pc, and up 12pc for regional loans in past year.
- Demand for equipment finance is up 32pc more in regional Australia than before the pandemic.
- Transaction account deposits up 20.6pc for agribusiness and over 15.2pc for regional businesses year on year.
- Low unemployment.
- Business conditions and confidence are strong although higher input costs like labour need to be considered.
Last month, Elders said the reasons people, many of them neighbours, are prepared to pay record prices are the same reasons most farmers are hanging onto their land, creating this situation where demand is outstripping supply.
Demand is strong for Australian grains, oilseeds, meat, dairy and fibre products, with experts, family farmers and investors believing this is likely to continue for some time, the Elders analysis found.
"Most participants in the rural property market take a long-term view, believing rural properties will continue to track positively over extended periods, as they have consistently done over the last 20 years," NAB's Mr Browning said.
The big rural lender said with plenty of cash on hand and a positive outlook for commodities over the year ahead, Australia's regions and agriculture sector seem well set up to take advantage of opportunities on the horizon.
"How long this intensity of activity can be sustained, however, remains to be seen; seasonal conditions and other external factors are sure to play a part," the report states.
"Given the current outlook, we see farmland values continuing to increase, but at a slower rate than in recent years."
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