This article is from the Australian Property Journal archive
AUSTRALIAN farmland values are at a turning point after a persistent period of strong growth, with the price of farmland up just 0.1% in the first half of 2023.
According to Rural Bank’s latest Mid-Year Australian Farmland Values update, this slight growth from the same time last year is significant change from the last four half year periods, where growth ranged between 16% and 23%.
Compared to the second half of 2022, the median price in the first half of 2023 was down by 3.9%, after consecutive growth in the last five half year periods.
This is a change from the past two years where first half growth was at 11.2% and 11.8%, respectively.
This was the fourth consecutive half where transaction volumes fell, with transaction volumes halving.
The volume of farmland transactions fell to its lowest level in the past 28 years, down 40.2% compared to a year earlier and 27% from the second half of 2022.
Western Australia, New South Wales and South Australia saw the strongest year-on-year growth in the first half of 2023, up 15.1%, 14.9% and 12.9% respectively.
While Victoria and the Northern Territory saw growth of 2.9% and 4.2%, Queensland was down 3.1% and Tasmania saw a significant decline of 24.7%.
In NSW, the median price increased to $8,649/hectare, up 12% compared to the second half of 2022.
In Victoria, the median price was at $13,035/hectare, down 11.1% from the second half of 2022.
The median price per hectare for Queensland farmland in the first half of 2023 was down to $7,822/hectare, reflecting a 4.5% decline from the last half of 2022.
In South Australia, the median price fell to $6,892/ha, down 2.4% over the past six months.
The median price of farmland in Western Australia was at $4,740/ha, down 6.4% from the second half of 2022.
In Tasmania, the median price fell to $14,034/ha, down 22.6% on the second half of 2022,.
“While the overall trend was a lack of growth in land values, median price growth in cropping regions generally kept pace with recent years,” read the report.
“Demand was likely sustained into early 2023 following another strong winter crop in 2022. In contrast, demand in grazing regions was weakened by declining livestock prices.”
With the major drivers of farmland values all shifting to less favourable conditions, including commodity prices, seasonal conditions and interest rates, demand is expected to remain unenthusiastic over the second half.
“As a result of reduced demand, farmland values are expected to remain steady or moderately decline across the second half of 2023.”
Rural Bank’s Commodity Price Index recorded a 22% decline across the first half of 2023 and in June was down 35% from the record high recorded in June 2022.
Conditions are expected to be drier in the second half, driven by El Niño, which will keep demand for expansion down for the rest of the year and into 2024.
While interest rates are also dragging on demand, with rates forecast to remain at the current level for the remainder of 2023 and throughout much of 2024, draining buying power.