Australian farmland values accelerate hitting fresh highs

Tracking every farmland sale annually for almost three decades, the Rural Bank Australian Farmland Values report has again seen growth in Australian farmland values accelerate throughout 2021 with new record prices set thanks to a near perfect mix of ingredients combining to drive the surge in demand.

Rural Bank General Manager Sales Partnerships and Marketing, Simon Dundon said “Stronger agricultural commodity prices coupled with a second consecutive year of favourable seasonal conditions in most areas improved cash flows and strengthened balance sheets, with support from record low interest rates and confidence in the long-term outlook for the agricultural sector all combining to see a surge in the buying power of Australian farmers”. 

“This is the eight consecutive year that the national median price per hectare of Australian farmland has increased, in which time it has risen by 123 per cent - driving the median price per hectare to $7,087, an increase of 20 per cent in 2021 alone and lifting the 20-year compound annual growth rate (CAGR) to 8.4 per cent. Tasmania recorded the highest median price per hectare at $14,730.”

The report found that farmland transactions in 2021 equated to a total of 10.8 million hectares of land traded at a record high combined value of $15.6 billion. Strong demand for farmland and record high prices has encouraged some landholders to capitalise on market conditions which saw transaction volumes increase by 22.5 per cent in 2021, the largest annual increase seen in 27 years.

To put this market activity into perspective, the total number of hectares of Australian farmland sold in 2021 equates to an area larger than a country the size of Portugal.

Mr Dundon said “Strong demand has made the market for farmland incredibly competitive. We have seen many farmers looking to acquire neighbouring blocks to expand the scale of operations or looking to regions further afield to diversify their landholdings, meaning that many properties are fiercely sought after by multiple cashed up and competing buyers.

“Median prices increased to new record highs in every state, except the Northern Territory, with the supply of land on the market also increasing. Overall, the strength of demand exceeded the rise in supply to drive prices higher, with some regional exceptions.

“Corporates, family farmers, life-stylers and tree-changers are all fuelling competition across the various property market segments which has seen the national median price record the largest year-on-year increase in dollar terms per hectare in the past 27 years - and the largest rise in percentage terms since 2005, however, signs of buyer caution are beginning to emerge”, Mr Dundon said.

“The prospect of higher interest rates and margin challenges from higher input costs could dampen demand and slow the rate of growth in property values. The strong rise in values in recent years will make some properties unaffordable for a number of farmers - and unviable as stand-alone operations, which should not be ignored, as it acts as a barrier to new entrants to the industry.

“As it stands, 2022 is shaping up to be another strong year for Australian agriculture and the longer-term fundamentals remain strong. This should continue to fuel interest from buyers with enough demand still in the market to push prices higher again in 2022.

“Overall, growth in farmland values has exceeded residential property prices in Australian capital cities, which have had a lower compound annual growth rate (CAGR) of 5.4 per cent over the past eighteen years.  Farmland value growth also outperformed the ASX 200 over the past 20 years, which has CAGR of 4.0 per cent, making a strong case for farmland to be seen as an asset class in its own right”, Mr Dundon concluded.   

Fast Facts

This fact sheet provides an overview of 2022 Australian farmland values.

National

• The growth in Australian farmland values accelerated in 2021. The buying power of Australian farmers surged off the back of stronger agricultural commodity prices, a second consecutive year of favourable seasonal conditions in most areas and was further supported by record low interest rates. Prices were driven higher as the strength of demand exceeded a rise in the supply of farmland.
• The median price per hectare of Australian farmland increased by 20 per cent in 2021 to $7,087/ha. The national median price has now increased for eight consecutive years.
• Western Australia, Queensland and Victoria all recorded growth of more than 30 per cent in median price per hectare in 2021. Median price growth was more modest in South Australia, Tasmania and New South Wales while the Northern Territory recorded a decline.
• In addition to strong price growth in 2021, the number of farmland transactions in Australia increased by 22.5 per cent to 10,032. This was the largest annual increase in transaction volume in the last 27 years and took the number of transactions to its highest level since 2007.
• There is still enough demand in the market to push prices higher in 2022, however buyers cautious about future rate rises may slow down the rapid growth seen in recent years.

Queensland

• Queensland farmland values recorded strong growth, accelerating in 2021 as the median price per hectare increased 31.3 per cent to a record high for the second consecutive year.
• The median price of $6,827/ha is a 47 per cent increase on 2019 median value, and almost double the median price in 2011.
• The median value of farmland in all Queensland regions increased year-on-year. The last time this occurred was in 2008.
• Strength in growth of price per hectare was coupled with a surge in transaction numbers as Queensland recorded the largest year-on-year increase by both percentage (35.7 per cent) and number (679 transactions). This jump occurred across all regions in the state and saw transaction volume reach a 13-year high of 2,583.

From the field

“Queensland’s strong growth in 2020 accelerated in 2021, increasing in both transaction volume and value. Increased median prices were driven by strong demand for smaller, higher valued lots in prime farming land close to population centres, aided by strong commodity prices, favourable seasonal conditions and renewed interest in the rural lifestyle. Improved pasture growth and appreciating stock value saw cattle operations looking to expand in grazing regions. While growth is expected to continue, it may slow down in some districts in the coming year with the rising cost of inputs and equipment, particularly if interest rates rise and commodity prices ease.”
Andrew Smith, Rural Bank, Eastern Australia.

New South Wales

• The median price of farmland in New South Wales set another record in 2021, increasing by a further 8.3 per cent to $6,339/ha. This was the eighth consecutive year of growth for the state.
• Price growth was relatively weaker in New South Wales compared to other states in 2021 weighed down by modest growth of 5.5 per cent in the Northern region and a decline of 0.5 per cent in the Central region. This offset strong growth in the Western and Southern regions where the median prices increased by 22.4 per cent and 28 per cent respectively.
• The number of farmland transactions in New South Wales increased by 29.4 per cent to 3,977.

From the field

“The New South Wales farmland property market saw another year of growth in 2021 off the back of a strong rise in the volume of transactions and land traded. This growth was driven by supportive seasonal conditions, good commodity prices, and plenty of motivated buyers. Many regions of New South Wales saw outside interest in farmland as city-dwellers looked to move regionally.  Moving forward into the rest of 2022, the market should remain reasonably buoyant as the Central and Western regions begin to see a greater supply of properties on the market, and with irrigation storages in the Northern region being full. Interest rates, however, may start to play a stronger role and slow any further growth to farmland values.”

Andrew Smith, Rural Bank, Eastern Australia.

Victoria

• Victorian farmland values rose for the sixth consecutive year in 2021 with the median price increasing by 30.4 per cent to $10,583/ha.
• The growth in median price per hectare was driven by significant and widespread increases in median price per hectare across all regions. In particular the South-West region rose by 35.2 per cent year-on-year.
• The total volume of transactions across Victoria rose by 12.8 per cent in 2021 to 1,817, above the five-year average of 1,680 and the highest recorded transaction volume since 2017.

From the field

“Victoria’s farmland property market underwent an increase in value across all regions of the state, on the back of favourable seasonal conditions across much of the state, low interest rates and strong buyer cash flows. The state saw a rise in the number of Melbourne buyers moving into regional areas and purchasing land, along with an increase in people electing to retire while land are prices so strong, capitalising on the buoyant market. Looking forward for the remainder of 2022, the market is expected to remain strong, and with healthy local demand in most districts, prices are also expected to be well above average.”

Andrew Smith, Rural Bank, Eastern Australia.

Tasmania

• Tasmanian farmland values rose for the third consecutive year, hitting record highs again in 2021 with a 7.6 per cent rise in the median price to $14,730/ha.
• The growth in median price per hectare was observed across all regions of the state with the exception of King Island. The South region of Tasmania recorded the largest increase in median price of 50.9 per cent.
• Potential buyers had to complete for even fewer properties in 2021 in comparison to 2020 with the state-wide transaction volume falling 15.2 per cent to 189, the fourth consecutive year that transaction volume across the state has declined.

From the field

“Farmland values across Tasmania have continued to trend higher in 2021 as constrained supply, low interest rates and rising demand supported values. This supportive macroeconomic environment has driven a continued desire for expansion amongst both large family growers and corporate farms, ensuring strong buyer competition across most of the state. The Northern and North-West regions have consolidated the large median increases reported in 2020, while the South region recorded significant growth after several years of declining prices. The year ahead could potentially see more caution come into the market as underlying fundamentals become less stable.”

Dean Lalor, Rural Bank, Launceston.

South Australia

• South Australian farmland values rose for the sixth consecutive year in 2021, with the median price increasing by 8.4 per cent to $5,940/ha
• The Eyre Peninsula led the way with substantial median price growth of 30.2 per cent while the South-East region recorded a nine per cent rise in median price. In contrast, the Adelaide and Fleurieu region and York and North region both saw declines.
• The total volume of transactions across South Australia rose by 14.9 per cent to 785 in 2021, slightly above the five-year average of 756 and the highest recorded transaction volume in the state since 2017.

From the field

“Strong demand for farmland across South Australia continued throughout 2021. This demand has been driven by the low interest rate environment, rising commodity prices, and strong production throughout the state, along with farmers’ increased appetite for expansion. This increased demand has continued to push farmland values higher across most of the state, particularly throughout the Eyre Peninsula and South-East regions - and in some cases making them unaffordable and unviable as stand-alone operations for a number of farmers. This increased supply of farmland was observed across all regions as some farmers looked to cash in on the record high land values, which didn’t dampen the strong competition from buyers who pushed farmland values across the state to record highs.”

Neil Verringer, Rural Bank, Adelaide.

Western Australia 

• Strong growth in the value of farmland in Western Australia continued in 2021 with a 36.3 per cent increase in the state’s median price per hectare, the largest increase of Australia’s states.
• The median price of $4,178/ha in 2021 was more than double the median price in 2018, highlighting the remarkable run of growth in the last three years.
• Median price growth was strong across the state with all the state’s five regions recording at least a 28 per cent increase in median price.
• The South-West region was the standout growth region for growth with a 46.6 per cent increase in median price per hectare.
• Western Australia was the only state other than Tasmania to record a decline in the number of farmland transactions in 2021. The number of transactions in Western Australia fell by six per cent in 2021 to 624, the third consecutive year of decline.

From the field

“Western Australian farmland values continued to climb higher in 2021 off the back of another great season, particularly for the cropping sector. Favourable seasonal conditions, high commodity prices and low interest rates combined to lift the confidence and willingness of landholders to reinvest in their businesses by purchasing additional land. Many growers will continue to pursue property purchases in 2022 as financial positions have strengthened following the 2021 record harvest and confidence remains high, thanks to strong commodity prices.”

James Robinson, Rural Bank, Western Australia.

Northern Territory

• The median price of farmland in the Northern Territory declined by 18.0 per cent in 2021. This followed an increase of 65.2 per cent in 2020.
• Cattle regions of the Northern Territory recorded a 57.9 per cent increase in median price per hectare in 2021. In the Top End region, the median price per hectare of farmland fell by 11.3 per cent in 2021.

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