Australia’s rural property market: Agents predict 2022 farm prices

Article by Tallis Miles courtesy of Weekly Times.

Rural property prices have soared this year, but with an unprecedented set of market conditions, what are agents expecting for the new year?

A “perfect storm” of variables has fuelled Australia’s booming rural property market this year.

Farms became even more attractive assets to buyers, with high commodity prices, low interest rates, quality seasonal conditions and access to affordable capital all contributing to the boom.

The biggest sale of the year saw Macquarie Agriculture – the nation’s second-biggest farmland investor – offload its Lawson Grains portfolio in NSW and Western Australia for a whopping $600 million.

Not far behind was the sale of Auscott Limited at Warren in NSW, which was snapped up by PSP Investments for more than $500 million.

The third-biggest sale of the year had a $370 million dollar price tag and saw Proterra Investment Partners sell its Corinella Group Portfolio in Victoria and South Australia for $370 million.

Another major sale saw the Oldfield family purchase the 796,000ha Ruby Downs and Sturt Creek property, at the Kimberly in Western Australia, for $70 million from Gina Rinehart.

With an eye to 2022, agents are expecting market conditions to remain similar and to feature more price rises.

Elders executive general manager of real estate Tom Russo said he had witnessed an “extraordinary year” for rural property sales.

“Throughout history we have never seen such a perfect storm of variables,” he said.

“Buy-side demand is the highest it has ever been and that is distinguished by this explosive price growth.

“Existing farms have been the healthiest they have been to pay down debt and other factors have given owners enormous firepower to grow their enterprise.”

In the past 12 months there has been a 13.6 per cent increase in the median price per hectare, based on properties larger than 40ha according to analysis by Elders of CoreLogic farmland transaction data.

Mr Russo said the suite of perfect conditions explained the dramatic price increase and he predicted the booming trend to continue into the new year.

“I think the growth is sustainable,” Mr Russo said.

“The logical outcome is that if you invest now you get to participate in Australia’s supply of a growing global commodity market.

“Existing landholders have enjoyed significant balance-sheet growth over this period, which has increased buying power.

“The increase in value has also prompted those looking to exit the industry to sell into a rising market.”

A similar sentiment is shared by other agents, with LAWD’s Danny Thomas describing the 2021 market as a product of “extraordinary momentum”.

“What people have been saying for some time has come to be realised. Farmers are looking at an extraordinary period of prosperity,” he said.

“It doesn’t matter if your property is a small acre or a large portfolio there is extraordinary demand.

“With good liquidity in the market, commodity prices that are very positive and really gentle climatic circumstances, is it any wonder people want to borrow cheap money to supercharge their businesses?”

Mr Thomas said his team had sold $1.2 billion of farming assets in 2021, with a further $800 million to hit the market in the coming months.

“Two years ago with Covid, we were all a bit worried how we might be affected, but we have been a net beneficiary in agriculture,” he said.

“There would need to be some black swan event that would erode commodity prices or a climatic change, but those things take time.”