The rural property price boom is tipped to end after a record run

While analysts say land prices will keep rising it will be at a slower pace to signal the end of the record run.

One of the nation's biggest farm lenders, Rural Bank (part of the Bendigo and Adelaide Bank group), say a number of market "headwinds" have softened the market.

Only a tightened supply of farms for sale last year kept those headwinds at bay and saw yet more price records.

The bank points to an "inflection point" to finally slow the growth in values recorded right around Australia.

Farmland sales last year equated to 8.8 million hectares of land valued at $11.7 billion.

For comparison, wheat exports from last year's bumper harvest have been valued at $14.2 billion and in 2020-21 red meat and livestock exports totalled $14.6 billion.

The amount of land which changed hands is similar in size to a European country such as Hungary.

The bank's annual deep dive into Australian Farmland Values said some of the drivers of the farmland price boom in recent years had changed.

Tracking every farmland sale annually for almost three decades, the 2023 Rural Bank report is the longest running analysis of the farmland market in Australia.

Interest rate rises are starting to bite, agricultural commodity prices began to fall during the second half of 2022 plus the cost of key farm inputs hurt cash flows.

Rural Bank's analysis of all property sales above 30 hectares in 2022 reflects the findings of similar reports from Elders Ltd and Rabobank in recent months.

All three reports point to a softening market.

Although, as Rural Bank's analysts point out, farmland values are still expected to rise as demand still outstrips supply but not to the same extent as recent years.

READ MORE: See our list of big property sales for 2022

Rural Bank's head of agribusiness development Andrew Smith said: "While there was enough momentum to sustain growth in farmland values in 2022, the continuation of these headwinds into 2023 could begin to drive a slowdown in growth."

Mr Smith said it was unlikely farmland values had yet peaked or were headed down.

"Rather, the new level of interest rates, downturn in commodity prices and potential for a drier finish to 2023 points to farmland values reaching an inflection point.

"Growth is still expected in 2023, albeit at a slower rate than the previous two years."

The Rural Bank report said farm land prices kept rising last year for the ninth consecutive year.

Land prices jumped another 20 per cent last year, following the 20pc rise the year before.

The national median price per hectare for Australian farmland is $8506 per hectare.

According to the bank's many years of data, farm prices have risen by 167pc in nine years.

Across the states in 2022, Tasmania soared on its median price per hectare with a 54.9pc lift.

Victoria, South Australia and Western Australia all recorded growth of more than 20pc closely followed by Queensland and NSW with increases of 15.9pc and 18.9pc respectively.

Hold onto your broadbrimmed hats, the Northern Territory recorded a stunning price growth of 108pc.

According to Rural Bank records, was the first time growth of over 15pc was recorded across all states and territories in 28 years..

The supply and demand equation came into play as the number of farm properties available for sale last year fell sharply.

Nationally, the number of farmland transactions fell by 34.3pc to 6588 - the lowest level of transactions in 28 years.

Across the states, falls in sales ranged from 13.8pc in Tasmania to a 44.6pc fall in Victoria.

South Australia was the only state to record an increased number of transactions in 2022.

The spike in commodity prices helped fuel the farm price boom.

Rural Bank says grain crops, dairy and livestock hit records in the past two years.

"Farm incomes delivered by high commodity prices in 2021 and into the first half of 2022 helped fuel strong buying power and the confidence to expand.

"The likelihood of lower farm incomes in 2023 has the potential to cause prospective buyers to reassess their purchasing intentions and consequently lead to a shallower pool of buyers," the report said.

READ MORE: National demand for land to continue

The end of the La Nina climate conditions is worrying farmers.

"... a dry start to the year and dry signals for coming months may lead to an element of caution now entering buyers' minds."

Rural Bank expects demand will still exceed supply, driving a 10^th consecutive year of growth in the national median price per hectare.

But demand is expected to "soften" with lower commodity prices, a drier rainfall outlook and relatively high interest rates.

"There is still appetite and ability to continue expansion and acquisition following strong farm incomes in 2022, however some buyers are expected to return to consolidation and take some competition out of the market."

Interest rate rises have likely taken some buyers out of the market as well, the rural lender said.