Farmland prices soar across Qld by 31pc, new Rural Bank report shows

The Australian Farmland Values 2022 report showed strong growth right across the state, mirroring commodity prices.

Rural Bank senior agricultural analyst and report author Michael Curtis said national farmland prices had decoupled from commodity prices, growing faster than the fundamental profit driver since 2016, but Queensland was different.

"It's only been in Queensland where there's remained a really close relationship in the last few years," he said.

"That's largely driven by Queensland having a really strong weighting towards cattle prices, which have risen at a pretty similar rate to land values."

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It also reflects the turnaround in seasonal conditions for most of Queensland.

Although the state experienced growth in seven out of the past 10 years, drought pushed median values down in 2017 and 2019.

The most dramatic rebounds were in western Queensland, where farmland prices leapt almost 34 per cent in 2021 after chalking up a 39pc increase the year before.

Mr Curtis said the year-on-year increase reflected the strength of the cattle industry.

"Both 2020 and 2021 have seen a real recovery in the beef herd," he said.

"That area has probably been reinvigorated by improved rainfall and producers wanting to get back into rebuilding their herds and expanding.

"Although there'd still be pockets of that region that were still in drought and didn't recover as much, I'd say that would be the main driver of two strong years in that area."

The booming cattle industry also drove prices up in the neighbouring cattle region of the Northern Territory, where prices shot up a remarkable 57.9pc, but Mr Curtis added a note of caution.

"The median price in that region is also quite volatile and bounces around quite significantly each year," he said.

Because there were relatively few sales in the Territory, Mr Curtis said just a handful of transactions could skew the numbers.

"I wouldn't put too much weight on the the Northern Territory result, but it is encouraging to see a large increase in 2021 and, probably similar to western Queensland, linked to the improvement in the cattle industry," he said.

Consistent growth in median price of central Queensland farmland delivered a 22.1pc increase on top of last year's 20.5pc.

After a decline in the median price of north Queensland farmland in 2020, a 15.0pc increase in 2021, sees it retain the highest median value of all regions.

After four years of prices fluctuating around $8000-$9000/ha, the median price per hectare in the north hit a record $10,150/ha in 2021.

Critical to the boom in prices were smallholders willing to pay top dollar.

The number of transactions above $10,000/ha in Queensland has more than doubled in the last three years.

Traditionally, the largest proportion of farmland sales in the state was in the $0-$2000/ha range, averaging 26 per cent of sales over the past five years.

But that's been turned on its head. In 2021, transactions in the highest-valued category took the lead, making up 35pc of sales.

That phenomenon was especially important in the state's south, where lifestyle property buyers fuelled the largest acceleration of any region, with growth jumping from an increase of 2.5pc in 2020 to 26.6pc in 2021.

Mr Curtis said that, as the only region to see median prices increase in each of the past four years, south Queensland was a driver of overall growth in the state.

Nationally, farmland prices grew 20pc in 2021.

The median price per hectare soared to $7087 a hectare in 2021, making it the biggest national price rise in dollar terms ever recorded in the 27-year history of Rural Bank's Australian Farmland Values report. It's also the largest rise in percentage terms since 2005.

Western Australia led the pack at 36.3pc, Queensland came in second with its 31.3pc and Victoria wasn't far behind at 30.4pc.

Markets were far less bullish in the remaining states, with SA recording 8.4pc, NSW at 8.3pc and Tasmania, 7.6pc.

Rural Bank general manager sales partnerships and marketing Simon Dundon said the long-term performance of the market was impressive.

"Overall, growth in farmland values has exceeded residential property prices in Australian capital cities, which have had a lower compound annual growth rate of 5.4pc over the past 18 years," Mr Dundon said.

"Farmland value growth also outperformed the ASX 200 over the past 20 years, which has CAGR of 4.0pc, making a strong case for farmland to be seen as an asset class in its own right."

Rural Bank predicted a rosy national outlook.

"Our overall view for for 2022 is that there's still plenty of demand to sustain what's been a competitive marketplace, coming off the harvest of a record winter crop at pretty good prices and the livestock sector is going really strongly as well," Mr Curtis said.

However, he said, rising interest rates and higher input costs would both dampen price growth.

"We'll maybe start to see the market slow down a bit but, at the same time, there's still plenty of demand," Mr Curtis said.

"I don't think supply is going to rise again, as it did in the last couple of years, so that points to another increase in values from a national perspective but regional trends can always be a little bit different."

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