Decade-Long Growth in Australian Farmland Values Set to Slow Down
According to an agribusiness expert, the combination of firm but not rampant demand and ongoing constrained supply will likely keep farmland values at their current elevated levels.
The upward trajectory of Australian farmland values is slowing down after a decade of consistent growth, as outlined in the 2024 Rural Bank Australian Farmland Values report.
The national median price for Australian farmland has increased by 201 percent at a compound annual growth rate (CAGR) of 11.6 percent over the last ten years, surpassing the 20-year CAGR of 8.4 percent.
Despite a 6.4 percent rise in the national median price to $9,575 per hectare in 2023, it represents the second lowest year of growth in a decade.
“The market has clearly shifted from the unprecedented value growth seen two or three years ago,” said Rural Bank Head of Agribusiness Development Andrew Smith.
Smith believes that a steady demand coupled with limited supply will keep farmland values close to their current high levels.
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Western Australia leads the way in farmland value growth, with a 32.6 percent increase in median price in 2023 and a five-year CAGR of 25.6 percent, according to the report.
New South Wales follows with a 15.8 percent median price hike, while Victoria ranks second in CAGR growth at 17.2 percent.
The other states reflected the 5 percent national growth trend in 2023, indicating a slowdown from the 22 percent to 35 percent growth rates in 2022.
Despite this, 44 percent of the country’s 39 regions experienced growth of over 20 percent in 2023.
Agriculture Market In a Trough
All agricultural commodity prices experienced a 36 percent decline by October 2023.
Between October 2022 and October 2023, the livestock price index dropped by 58 percent, impacting farmland demand in grazing areas as industry confidence waned.
Simultaneously, the crop price index fell by 4 percent, which was 15 percent lower than its peak in May 2022.
Drier conditions in Australia disrupted farmland demand, leading to a 30 percent decrease in winter crop production compared to 2022.
While improved summer rainfall and neutral climate settings boosted sentiment, it didn’t necessarily translate to strong land purchase demand. However, it could alleviate pressure on landholders to sell farmland.
Additional cash rate hikes by the Reserve Bank of Australia also impacted farmland demand.
Buyers’ decisions were influenced by the continued interest rate increases throughout 2023, culminating in a final raise to 4.35 percent in November 2023, the highest since November 2011.
According to Rural Bank’s forecast for the year, commodity prices, seasonal conditions, and interest rates are expected to balance supply and demand while supporting the decline in farmland values in 2024.
“As a result, values are projected to stabilize as farm businesses focus on consolidation after recent years of expansion,” concluded Mr. Smith.
In 2023, farmland transactions accounted for six million hectares of land, totaling $14.5 billion.
The National Farmers Federation has put forward 17 investment recommendations (pdf) to the federal government to support sustainable growth in the agriculture sector ahead of the budget.
“Key recommendations include investing $1 billion over four years in regional infrastructure to enhance Australia’s international freight supply chains and $2 billion over four years to support complementary measures in the Murray-Darling Basin,” stated National Farmers’ Federation President David Jochinke.
“Agriculture has consistently proven itself as a powerhouse in the Australian economy, and by backing the industry, the government can help ensure its enduring success and resilience for many years to come.”
