Australian farmland prices have seen their highest growth in 27 years with land values increasing by 20 per cent in the past year, according to a Rural Bank report released on Tuesday.
The Australian farmland value report which analysed data from 1995 onwards found the median price of rural land grew for an eighth year straight in 2021, a total of 123 per cent since 2014, and now sits just above $7000 per hectare.
The report found farmland transactions in 2021 equated to a record total of 10.8 million hectares of land traded and a record high combined value of $15.6 billion.
Senior agricultural analyst at Rural Bank Michael Curtis said the sales represented a 22.5 per cent increase in the number of transactions over the year.
The hectares of Australian farmland sold in 2021 equates to an area larger than a country the size of Portugal.
“That’s partly due to farmers that would have held on rather than selling during the drought period of 2018 and 19,” Mr Curtis told AAP.
He said farmland values have grown at a slightly faster rate than the house market over the past 18 years.
“We’ve seen residential property prices in Australian capital cities grow at about 5.4 per cent per year and that compares to Australian farmland which is increasing at about 8.4 per cent over the same period.”
Western Australia, Queensland and Victoria all recorded growth of more than 30 per cent in the median price per hectare in 2021, while growth was more modest in South Australia, Tasmania and New South Wales and the Northern Territory recorded a decline.
Parts of southern Tasmania saw the biggest growth of any region, with an increase in the median price of 50.9 per cent, but softer growth elsewhere in the state meant the median price of rural land only increased by 7.6 per cent.
Tasmania also recorded the highest median price per hectare at $14,730.
“Farmland values across Tasmania have continued to trend higher in 2021 as constrained supply, low interest rates and rising demand supported values,” said Dean Lalor from Rural Bank in Launceston.
Overall Western Australia saw the biggest price hikes according to the report, with the state recording a 36.3 per cent increase in land values over the year.
The only area in Australia that saw a decline was the Northern Territory, where the median price went backwards by 18 per cent. Although this followed an increase of 65.2 per cent in 2020.
The farmland values report found favourable conditions for farmers had been driving prices higher.
“Corporates, family farmers, life-stylers and tree-changers are all fuelling competition across the various property market segments,” said Rural Bank’s general manager of sales partnerships and marketing Simon Dundon.
But Mr Dundon said there were signs of buyer caution beginning to emerge.
“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.”