Forecast for farmland prices released by Rabobank in their new outlook report

The forecast for farmland prices has been released by an agribusiness banking specialist. See what land values are expected to make over the next 18 months and why.

Forecast: Farmland values are expected to see little growth for median prices over the coming 18 months.

FARMLAND values are expected to see low to no growth for median prices over the next 18 months, according to a major report released today.

The annual report published by agribusiness banking specialist Rabobank found while prices of Australian agricultural land are at record highs in many regions, the market is entering a new phase with the robust growth in agricultural property prices witnessed over the past five years slowing.

Report author and Rabobank agricultural analyst Wes Lefroy said already there had been lower agricultural land price growth in 2019 than in the previous two years.

“For the time being, the aggressive rise in land prices is behind us, and we are expecting a period of low, if any, growth in 2020. Ultimately though, this will vary by quality, region and production type,” he said.

The report found a number of factors are contributing to the slowing rate of growth and chief among these is the trailing effect of recent years of drought, with the impact on land prices often delayed – bringing periods of very low, if any, land price growth, even when rainfall returns.

“It may seem paradoxical, but a key factor weighing on land price growth is the return to better seasonal conditions and drought recovery that is occurring particularly on the east coast,” Mr Lefroy said. “In drought-affected regions, there has been a shortage of properties on the market with many potential sellers choosing to hold off until conditions improved, and this reduced supply had been supportive of price growth.

Added to this, Mr Lefroy said the ongoing economic crisis triggered by the COVID-19 pandemic was also taking its toll on farmer revenues and confidence.

“The pandemic and related economic crisis are like a large, unpredictable storm that could cause damage. It is possible at some point in the next six months, we will see agricultural commodity prices further exposed to the underlying economic crisis we are currently being shielded from by government stimuli,” he said.

“At the very least, it will continue to undermine confidence.”

While there will likely still be a number of “marquee” sales in some locations – especially for high-rainfall properties with scale – median agricultural property prices in some regions may even see a contraction over the coming 18 months, the report says.

However, macro-economic factors, such as low interest rates and a forecast weakening in the Australian dollar – along with the overall healthy state of farm balance sheets across the country – will prevent a major downward correction.

“And if agricultural land prices can hold the significant gains they have made over the past five years in the year ahead, through the worst economic crisis we are facing in decades due to the coronavirus pandemic, this will be a great result for landholders,” Mr Lefroy said.

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