Rabobank Australian Agricultural Land Price Outlook expects double-digit growth in 2023

The agricultural land price boom is expected to continue through 2023 although growth is set slow after three years of massive increases.

The agricultural land price boom is expected to continue through 2023 although growth is set slow after three years of massive increases.

Agribusiness banking specialist Rabobank’s annual Australian Agricultural Land Price Outlook says three consecutive seasons of good financial performance by the farm sector – driven by high commodity prices and good weather conditions – will underpin a double-digit percentage growth in agricultural land prices in 2023.

However, the bank believes farm land prices won’t reach the record increases of nearly 30 per cent in 2021 and 2022.

Report author, RaboResearch agriculture analyst Vitor Pistoia, said land sale prices in early 2023 were still setting new records.

RaboResearch agriculture analyst Vitor Pistoia.

However, he said growth would be to a lesser extent than in 2022 as the combination of high property prices and increasing interest rates – along with the expected onset of El Nino, and potentially drier weather for many parts of Australia, which may hamper agricultural yields – will impact on farmers’ appetite for buying land.

While a decline in agricultural land prices is not forecast, the bank cautions that – after an estimated double-digit percentage price increase this year – a significant slowdown in the pace of price growth is expected from 2024 potentially through to 2028.

“Commodity prices are likely to remain at good levels for farmers for the next one to two years. However, the drier forecast may result in lower yields and reduced margins, while rising interest rates will curtail long-term investment plans,” Mr Pistoia said.

“Currently, cash already available in the system and stocks of grains and livestock ready to enter the market remain the key factors driving land price growth.”

According to data from Digital Agricultural Services agricultural land prices across Australia soared in 2022. The bank’s analysis of the DAS data, which comprises rural sales and excludes lifestyle and non-market transactions, shows agricultural land prices across the country rose by 29 per cent (median price per hectare) in 2022. The data showed cropping land prices rose by 29 per cent, livestock grazing land by 26 per cent and dairy 29 per cent.

Agricultural land prices were found to have recorded double- digit percentage growth on the previous year in all states, with South Australian farmland prices rising the most at 34 per cent.

Farmers’ appetite for property remains strong, with Rabobank research – conducted in the first quarter of 2023 – showing 7 per cent of Australian farmers intend to buy land in the next 12 months.

Originally published as Rabobank Australian Agricultural Land Price Outlook expects double-digit growth in 2023