The report — supported by farmland sales data from Digital Agricultural Services — says “favourable macro forces” are continuing “to swell (agricultural) land prices” in 2022, following “massive growth” seen in 2021.
The bank’s analysis — of the data set comprising genuine rural sales and excluding lifestyle and non-market transactions — shows agricultural land prices across the country rose in 2021 by 27 per cent (median price per hectare), “with double digit annual growth recorded across all states”.
“Almost similarly-strong year-on-year growth has occurred so far in 2022 across our available data set, which currently covers about 30 per cent of the estimated full-year 2022 Australian farm sales,” the report says.
This preliminary data indicates growth of above 25 per cent in Australian agricultural land prices so far for 2022, suggesting full-year 2022 sales will easily yield double digit growth. The size of land deals is also continuing to increase.
International comparison shows Australia has also outpaced many other countries in recent years when it comes to growth in agricultural land values.
Report author, RaboResearch general manager Australia and New Zealand Stefan Vogel, said this growth was driven by a very positive ”constellation of factors”, including strong agricultural commodity prices and good production volumes, which had “bolstered farmers’ cash reserves and driven demand for land purchases”.
“For multiple years in a row, the macro settings have been exceptionally favourable for land purchases. Prices of most major agricultural commodities hit or moved close to record highs, widespread rainfall has supported Australian production and interest rates have been at record lows,” he said.
Slower growth in farmland prices is, however, forecast for 2023 and beyond, the report says although “no decline in farmland prices” is on the horizon.
Mr Vogel said while agricultural commodity prices were likely to stay well above the five-year average for the next one to two years, costs — including for farm inputs such as fertiliser — were also expected to exceed their five-year average, and interest rates were rising.
For the states, the report found some of the biggest increases in farmland prices in 2021 had occurred in Victoria where cropping land was found to have increased by a staggering 78 per cent and grazing land by 42 per cent.
Overall, the median price for arable (non-irrigated) farmland across Australia rose by 27 per cent in 2021, grazing land increased by 33 per cent and dairy land by 40 per cent.
By region, the data set showed 30 per cent of the nation’s farm sale deals occurred in NSW in 2021, with 22 per cent in Queensland, 20 per cent in Victoria, 12 per cent in Western Australia, 11 per cent in South Australia and four per cent in Tasmania.
