LAWD senior director Danny Thomas joins the Australian Ag podcast

Australian farmland is expected to hold its value this spring selling season, especially at the top end of town.

Despite softening commodity prices, higher costs of borrowing and a less favourable seasonal outlook, rural property values are expected to hold their price, especially at the top end of town.

LAWD senior director Danny Thomas said he was “cautiously optimistic” in the outlook for rural property values for the next 12 months, but noted enthusiasm in the farmer-to-farmer market had decreased.

“There’s certainly been some fairly seismic shifts in things and conditions that affect confidence as it goes to rural property transactions,” Mr Thomas told the Australian Ag Podcast.

“First among them, I think, is probably the rapid increase in interest rates.

“I think most people probably borrow the money with a lens to the fact that interest rates are going to increase, but I think their speedy ascent has probably curbed some enthusiasm in the market.

“Separately to that if you’re in sheep meat or beef you’d have every reason to feel a little bit down in the mouth at the present time, given the seismic shifts in those values.

“In terms of what that means for the farmer-to-farmer market, we’ve been talking recently about the market normalising and being a little more sensible.

“Two years ago, you’d have 10 or a dozen bidders vying for a property because of a lack of available supply. Now you’ve got sometimes only one purchaser or sometimes two or three.”

However in the institutional investment segment of the market there is much more activity, Mr Thomas said.

LAWD senior director Danny Thomas at the Global Food Forum in 2021. Picture: Nikki Short

“In stark contrast to that the institutional market is strong and strengthening,” he said.

“There are lots of reasons for that, including greater allocations to natural resources.”

For example, Canadian-backed Lawson Grains purchased the 13,498ha Jemalong Station in central west NSW via $85 million deal with Dutch agricultural investors Optifarm.

Mr Thomas also said a favourable exchange rate for foreign buyers was fuelling their interest in Australian farmland.

“With that two-tiered market, if we have a significant number of properties coming to the market, this spring selling season, for some of those it could be challenging to find the right buyer for them,” Mr Thomas said.

“But at the top end, fluctuations in season don’t affect the investment decisions at the large institutions, they’re investing through the cycle.

“If the market goes into a period of imbalance where there’s more supply than what there are buyers then we might see things track sideways for a while.”