Little change this year in high prices for Australian farm land | state by state analysis

One of the nation's leading rural real estate firms, Elders Ltd, has clearly shown rural property has split from the rapidly cooling national housing market.

Interest rates are still having little impact on demand as land prices continue to rise year on year, Elders research has shown.

Most property experts continue to say only the end to this welcome run of good growing seasons will see farm prices come off the boil.

The luxury of high commodity prices has seen some farmers withdrawing land from sale if they failed to get the high prices as others have done.

Elders today produced its second quarterly report on farm land sales around Australia to show demand is still running strong right across the country.

Elders executive general manager (real estate) Tom Russo said the amount of capital looking to be spent in Australian agriculture is far exceeding available opportunities.

Mr Russo said a reduction in property inventory is fuelling the supply/demand dynamic so it remains a seller's market.

Most of the contraction was in New South Wales and Queensland.

Historically the first selling quarter of the year has the lowest transaction volume of any quarter, driven by fewer listings due to holidays and a shorter number of working days within the quarter.

The Elders report found commodity prices have risen faster than property values for the third quarter in a row.

Analysts said there were signs buyers are watching interest rates and rising input costs closely with some regions showing a decline in value from last quarter.

They also said agricultural land is seen as a haven during periods of inflation as consumers reduce discretionary spending but continue to demand staple food items which supports commodity prices.

Nationally, the median price per hectare fell by 2.5 per cent in the first three months of the year taking the quarterly median price to $7442 per hectare.

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Analysts said the main driver of the decline was a change in transaction mix, whereby lower priced states such as South Australia and Western Australia made up a greater proportion of total transactions.

Elders predicts rural property prices will continue to grow in 2022 but the performance of all variables in the second half of the year will be crucial to the shape of the growth curve in 2023.

Elders rural sales executive (South Australia) Adam Chilcott said the south east, lower mid-north and lower Eyre peninsula are attracting huge demand.

Mr Chilcott said a doubling of offers had seen on an add on cropping block in the rarely transacted Redbanks, near Mallala, reach a district record, shattering the previous high by almost 200pc.

He said in other areas of the state, some buyers have indicated that they are starting to see value and opportunity in areas such as the Riverland and Mallee and are willing to hedge their holdings across multiple regions.

Elders state real estate manager (South Australia) Phil Keen said interest in cropping and livestock properties remains high driven by bullish grain prices and a widespread, albeit late Autumn break.

"We expect this trend to continue in 2022 despite interest rate rises," Mr Keen said.

From those sales in the first quarter, the state's cropping regions surged in the first quarter from a transaction volume perspective.

The South West region was again a standout performer.

Larger parcels greater than 600ha accounted for most of the increase in transaction volume, the Eyre Peninsula dominated this category in the first three months of the year.

The year by year median price per hectare increased by 4.1pc to $4580/ha.

Elders state real estate manager (Qld/NT) Rob Anderson said supply was tightening, and several potential vendors are sitting on the fence for now waiting for further clarity on the impact of interest rate rises and increased input prices.

"However, commodity prices remain strong and sustained demand for Australian horticulture, livestock and cropping products will continue to underpin buying decisions in 2022.

"Quality grazing properties have been particularly sought after, as corporates alongside family enterprises look to expand."

At region level median price per hectare grew strongly in the Central and West regions.

However, fewer transactions in the South region led to a decline in price at state level.

Transaction volume was down across all parcel sizes, most notably smaller parcels under 150 hectares.

The one year rolling median price per hectare rose by 6.5pc to $6247/ha.

Elders state real estate manager (NSW) Richard Gemmell said properties of scale, diversity and the ability to integrate into existing portfolios have been highly sought after in 2022.

"Existing landowners with a carbon neutral mandate have been active in the market and this trend will likely continue," he said.

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"Demand remains high for well managed grazing land. We expect momentum to continue for the foreseeable future, driven by strong commodity prices and seasonal conditions."

Elders state real estate manager (Victoria/Riverina and Tasmania) Nick Myer said sentiment was strong across most industry sectors at present, particularly mixed farming assets that have the ability to produce quality beef, prime lamb, grain and oilseeds.

"New investors have been active; however, most of the demand has been derived from encumbered investors looking to expand their portfolios.

"Prices are expected to remain buoyant throughout the balance of 2022, underpinned by strong commodity prices and limited supply. However, we are consistently monitoring events that may affect demand."

The South West and Wimmera-Mallee regions performed strongly in the first quarter, however, fewer transactions in the North East and Gippsland tempered state performance.

Larger parcels of land appreciated at a higher rate with most of these parcels transacting in the Wimmera-Mallee.

The one year rolling median price per hectare increased by 9.5pc in the first quarter to $11,561/ha, continuing a strong positive trend.

Elders senior rural real estate executive (Western Australia) Simon Cheetham said they were yet to experience any drop in demand for WA farmland in 2022 from that seen in 2021.

Seasonal conditions in 2022 have been a mixed bag to date, however, there has generally been sufficient rain to get crop and pastures established across the state, Mr Cheetham said.

"All buyer groups remain in force, particularly family and corporate broadacre farmers looking to expand, and there has been a noticeable increase in demand for properties suited to forestry also," he said.

As we enter the prime sales season for broadacre properties, those farms already listed are receiving very strong interest. It remains a sellers market and we envisage prices to remain high with potential for further upside for the foreseeable future.

Larger parcels of land in northern WA and the Great Southern region dominated the transaction mix in the first quarter.

These transactions are priced comparatively lower than smaller parcels resulting in a decline in median price per hectare at state level.

At region level, Avon-Midland and south-west WA outpaced other regions in terms of growth in median price per hectare.

The one year rolling median price per hectare increased by 6.1pc in the first quarter to $6934/ha (the tenth consecutive quarter of growth).

Tasmania remained a slow market in the first quarter. Transaction mix altered towards the lower value South region which contributed to a decline in median price per hectare.

Transaction volume was down across all parcel sizes except for 100-150ha range. Most of these sales were on the Islands.

The one year rolling median price per hectare increased by 2.1pc to $11,003/ha, continuing a period of plateau.

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