Aussie farm property boom defies fears of interest rate hit

The cooling off in the national housing market has not impacted on rural property sales just yet.

Elders' latest Rural Property Update shows farm optimism is still high on the back of strong commodity prices and continued good seasons.

Taken from sales figures over the past year, the national median price of farm land is now $7413 per hectare.

It is still driving demand from investors and farmers looking to expand their mixed farming operations.

One of the nation's biggest rural real estate firms, Elders Ltd, expects rural property prices to defy the house price trend and continue to rise even further for the rest of the year at least.

Examining the movement of property prices for the first quarter of this year, Elders analysts say the sector remains strong nationally with very tight supply and high confidence, despite rising interest rates.

Key points from the report:

Rural property sales fell markedly by almost a third to 1513 sales totalling $2.6 billion.

Nationally, the median price per hectare decreased slightly by 2.5 per cent to $2442/ha.

But the rolling one-year trend remains positive, rising by 5pc to $7413/ha.

Elders analysts say there has been a fall in the median price per hectare in five of the seven states and territories in the first quarter of the year.

They blame the fall on a greater number of sales in lower priced cropping dominant regions, which is common at the start of each year.

Tasmania recorded the largest fall (down 30.4pc) in median price per hectare with Western Australia down 12pc.

Still, the overall yearly median price per hectare rose for every state and territory highlighting strong underlying demand.

Victoria led the way up 9.5pc followed by Queensland (up 6.5pc).

NSW had a strong quarter in sales up 13.1pc.

Elders NSW state real estate manager Richard Gemmell said properties of scale, diversity and the ability to integrate into existing portfolios have been highly sought after in 2022.

"Existing landowners with a carbon neutral mandate have been active in the market and this trend will likely continue," Mr Gemmell said.

The fundamentals of the rural property market remain strong even as interest rates start rising.

MORE READING: What the next six months holds for farmers.

That increase is coming from a low base and has been largely offset by gains in commodity prices particularly for grain and beef.

Both remain well above year ago levels and will remain the driving force in the rural property market across Australia, Elders said.

Also, rural land is generally considered a hedge against inflation as prices rise demand generally falls for most products except food.

This may see greater interest for rural land from institutional and corporate investors.

Elders executive general manager real estate Tom Russo said the outlook for Australian production remained positive, with a potential for production of grain and beef to increase alongside comparatively high prices.

"This scenario is obviously tempered by an increase in input cost prices however we expect profitability to remain high in 2022 and into 2023 which will aid buying power when it comes to rural property," Mr Russo said.

"Overall, we expect property prices to continue to increase in the second half of 2022 driven by tight supply and high confidence across most agricultural sectors."

The market fundamentals for most Australian farmland outputs and demand for product is cementing confidence from experts, farmers and investors alike.

"Second and third quarter updates will tell us if this prediction plays out as we expect," Mr Russo said.

Elders collated prices for every rural property sale above 40ha in partnership with Corelogic (aside from Tasmania where properties above 30ha were also used).

STATE BY STATE ANALYSIS TO COME

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