A decade of unprecedented and unbroken growth in the value of farmland across northwest Victoria – and the rest of the country – is running out of steam, according to Rural Bank.
In its just-released Rural Bank Australian Farmland Values Report, it says the market has started to shift.
The longest-running analysis of the farmland market in Australia, the Rural Bank Australian Farmland Values Report has tracked every farmland sale annually for almost three decades and provides detailed market information from a national to a local level.
The bank’s head of agribusiness development, Andrew Smith, told North West Farmer while 2023 saw yet another rise in the national median price, capping off an extraordinary period for farmland values, it also marked a shift in the market as the pace of growth has slowed considerably.
And this has been reflected across northwest Victoria.
“From my, and the bank’s, perspective, the key drivers of farmland values look set to remain in a holding pattern for the remainder of this calendar year,” Mr Smith said.
“Making it increasingly likely the market will now see a plateau in farmland values.”
The Rural Bank report shows the past 10 years have seen the national median price for Australian farmland actually triple, rising a staggering 201 per cent – and at a compound annual growth rate (CAGR) of 11.6 per cent.
That rate of growth is well ahead of the longer-term 20-year CAGR – which sits at 8.4 per cent.
At the same time the national median price per hectare increased by 6.4 per cent in 2023 to $9575 per hectare, also marking the 10th consecutive year of growth, but interestingly the second-lowest year of growth across the decade.
For the Mallee, while it has enjoyed growth ahead of the national median – and outperformed Western Australia, the price powerhouse – Mr Smith said the same slowdown would be felt here.
Our current median price per hectare is $5839, a five-year CAGR of 25.8 per cent, a 10-year of 16.4 per cent and at 20 years it sits at 10.7 per cent.
While rural property remained very much in demand, record lows of supply helped push farmland values to new record highs in 2023, with many regions across the country experiencing exceptional growth in values – and that was particularly the case in Western Australia, which had a median price growth of 32.6 per cent in 2023.
Numbers which helped that state deliver an astonishing five-year CAGR of 25.6 per cent – followed by Victoria in a distant second with a CAGR of 17.2 per cent.
And just behind the Mallee’s 25.8.
A continuing tightening in the number of transactions is helping to further drive price growth across the nation’s 39 agricultural regions, with 44 per cent of those recording growth of more than 20 per cent in 2023.
With eight of the top 10 growth regions in 2023 recorded in Western Australia, South Australia or Tasmania.
One of the most significant handbrakes on demand for farmland in grazing regions was the scale and speed of the decline in livestock prices in 2023, eroding confidence in those industries.
In addition to lower commodity prices, generally drier conditions have also acted as a headwind to demand.
Better than expected summer rainfall, coupled with the forecast of climate drivers returning to neutral settings during autumn and winter has improved sentiment for 2024.
While this may not necessarily renew strong demand for land purchases, it should mean that landholders will feel less pressured to sell farmland for the time being, keeping supply of farmland on the market relatively subdued.
As a result, values are expected to proceed through what we see as a period of stability as farm businesses focus on consolidation after all those recent years of expansion.
Farmland transactions in 2023 equated to a total of 6 million hectares of land traded at a combined value of $14.5 billion.
To put this market activity into perspective, the total number of hectares of Australian farmland sold in 2023 equates to an area similar in size to the US state of West Virginia”, Mr Smith said.
You can download the full Rural Bank Australian Farmland Values Report www.ruralbank.com.au/knowledge-and-insights/publications/farmland-values/
