Local farmers on both sides of the border continue to see a stellar rise in the value of their properties.
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A combination of low interest rates, improved seasonal conditions, consistent rainfall averages and strong returns from farm produce is said to be behind the continued surge.
Figures released by the Rural Bank’s annual Australian Farmland Values report show the Federation Council area continued its repeated growth for the year 2020 with a median price per hectare of $5,560 representing an impressive 13.0% compound annual growth rate over the past 5 years.
And these values are set to continue to climb for at least another five years – with the sharpest growth to 2023 according to Rabobank’s newly-released annual Agricultural Land Price Outlook.
In Moira Shire values were sitting at an impressive median high of $7,128 per hectare in 2020, a compound annual growth rate of 6.4% over the past five years.
The Moira region also experienced a large amount of properties turned over with 78 transactions for the year 2020, the fourth highest area in Victoria behind Moyne (89), Wellington (91) and Corangamite (93).
Northern Victoria’s medium price per hectare has soared from under $2,000 in 1997 to a $7,399 per hectare in 2020.
Since the mid-1990s Federation Council area medium values have increased dramatically from around $1,000 per hectare to over $5,500 per hectare.
The median price per hectare of farmland in entire Southern New South Wales area increased by 12.4 per cent in 2020 to $5,010 per hectare. This is the fourth consecutive year of double-digit growth for the region, reflecting strong demand for tightly held land particularly in high rainfall areas.
In neighbouring Indigo Shire farmland values remain strong at $8,693 per hectare in 2020, representing a compound annual growth rate of 6.3% over the last five years.
Xavier Leslie from Yarrawonga Elders Real Estate said farming properties continue to be held in high demand.
“It’s been a fantastic start to this season with rain but there’s ‘still a lot of water to go under the bridge’.
“Last year was one of the best years we’ve had and let’s see what continues.”
Farmland values wise, Mr Leslie said a recent sale of a mixed farming property just north of Mulwala produced “a fantastic result”.
“If properties come on to the market, the demand is there,” he said.
Last year, Brian O’Shea from Paull & Scollard Nutrigent Ag Solutions in Corowa referred to the considerable improvement in the value of farmland in the Southern Riverian, especially in Corowa, Yarrawonga and towards the north, and the limited supply of property to the market.
Whilst commodity prices are volatile at the moment, the value of properties is a big positive,” he said.
“Rural land of all sizes is highly regarded around here. The demand has been overwhelming from interstate buyers along with existing landholders expanding.”
Mr O’Shea commented: “It’s a continuation of last year what we’re seeing today, the only issue is the rising prices of chemicals, fertilisers and fuel.
“Sheep and cattle are magnificent; we’re feeding the nation.”
CEO of Rural Bank Alexandra Gartmann said the report demonstrated that farmland continued to perform extremely well and reflected the underlying strength of the sector.
“Low interest rates and consistent commodity prices, coupled with exceptional seasonal conditions throughout 2020, have provided farmers with capital and an incentive to invest. These factors have proven to be powerful drivers in terms of demand for farmland,” Ms Gartmann said.
For the first time, the Australian Farmland Values 2021 report explores the correlation between commodity prices with both national and state median price per hectare.
“Historically, there has been a strong relationship between commodity prices and farmland values, however, 2020 saw an increasing gap between the two, which we first observed in 2016 and which continues to widen,” Ms Gartmann said.
“Many farmers are seeking to expand. This, combined with a smaller pool of sellers, has resulted in strong competition for property. Farmland prices and farmland as an asset class will continue to be keenly watched but increasing asset price alone is no guarantee that agriculture as an industry will continually prosper.
“Positive trends in commodity prices underpinned by strong export demand and a growing domestic market can be tempered by factors such as a changing climate and increasing demands from consumers for transparency within the production and supply chain.
“Experienced buyers with clear heads and an eye on the longer-term will also weigh up geopolitical risks and their potential impact on commodity prices. But even with these risks in mind, it appears that high values for quality farmland will continue to be supported in the short to medium term”, she said.
In Rabobank’s 2021 report, supported by Digital Agriculture Services (DAS), the agribusiness banking specialist outlines a “base-case forecast” for Australia’s heated agricultural land market to continue on a growth trajectory, fuelled by a booming agricultural economy and limited available land for purchase.
“Not in the last 30 years have the macro settings been so supportive” of agricultural land price growth, the report says, with prices of most major agricultural commodities either at, or near, record levels.
This – together with favourable seasonal conditions in the majority of Australia seeing widespread rainfall supporting production – has driven farm revenues to record levels, says report author, Rabobank senior analyst Wes Lefroy.
“Strong production years and high commodity prices, alongside record low interest rates, have boosted farmers’ purchasing power,” he said.
“Nationally, our research is showing that farmer purchasing intentions are at the highest point in at least the past five years, with nine per cent of Australian farmers reporting that they intend to buy land within 12 months.”
Lack of supply is also playing a role in squeezing agricultural land prices higher, the report says, with 45 per cent fewer sales recorded in 2020 compared with 2019.
Mr Lefroy said the factors which had supported robust growth in Australian agricultural land prices were forecast to continue.
“We think it’s likely that commodity prices will remain supportive for the next 24 months, while we expect interest rates will stay at record lows until at least 2024,” he said.
While, the report says, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) expects the value of farm production to reach A$73 billion in 2021/22, an impressive eight per cent above last year’s A$68 billion record and 17 per cent above the five-year average.
“For land price growth to reduce, or even for a downward correction to occur, we would need to see a multi-year interruption to a combination of commodity prices, production or interest rates,” Mr Lefroy said.
The report says a shortage of available agricultural land for purchase has been contributing to ‘fear of missing out’ (FOMO) among farmers and adding upward price pressure to the market.
“After sales of agricultural land peaked in 2019, the number of properties on the market decreased in 2020 and even further in 2021 so far,” Mr Lefroy said.
“Across the country the pipeline of sales coming on to the market is historically very low, which presents a distinct lack of buying opportunities.
“We have observed the ‘fear of missing out’ factor prompting buyers to enter the market earlier than they had planned.
In some cases, Mr Lefroy said, “FOMO” was prompting buyers to enter an EOI (expression of interest) for a purchase at much higher than the productive value in order to secure the property, not knowing when another opportunity may arise.