A combination of low interest rates, improved seasonal conditions, consistent rainfall averages and strong returns from farm produce is said to be behind the continued surge.
Figures released by the Rural Bank’s annual Australian Farmland Values report show the Federation Council area continued its repeated growth for the year 2020 with a median price per hectare of $5,560 representing an impressive 13.0% compound annual growth rate over the past 5 years.
Since the mid-1990s Federation Council area median values have increased dramatically from around $1,000 per hectare to over $5,500 per hectare.
The median price per hectare of farmland in entire Southern New South Wales area increased by 12.4 per cent in 2020 to $5,010 per hectare.
This is the fourth consecutive year of double-digit growth for the region, reflecting strong demand for tightly held land particularly in high rainfall areas.
In neighbouring Indigo Shire farmland values remain strong at $8,693 per hectare in 2020, representing a compound annual growth rate of 6.3% over the last five years.
In 2020 Brian O’Shea from Paull & Scollard Nutrigent Ag Solutions in Corowa referred to the considerable improvement in the value of farmland in the Southern Riverian, especially in Corowa, Yarrawonga and towards the north, and the limited supply of property to the market.
Whilst commodity prices are volatile at the moment, the value of properties is a big positive,” he said.
“Rural land of all sizes is highly regarded around here. The demand has been overwhelming from interstate buyers along with existing landholders expanding.”
Last week, Mr O’Shea commented: “It’s a continuation of last year what we’re seeing today, the only issue is the rising prices of chemicals, fertilisers and fuel.
“Sheep and cattle are magnificent; we’re feeding the nation.”
Xavier Leslie from Yarrawonga Elders Real Estate echoed Mr O’Shea’s comments.
“It’s been a fantastic start to this season with rain but there’s ‘still a lot of water to go under the bridge’.
“Last year was one of the best years we’ve had and let’s see what continues.”
Farmland values wise, Mr Leslie said a recent sale of a mixed farming property just north of Mulwala produced “a fantastic result”.
“If properties come on to the market, the demand is there,” he said.
CEO of Rural Bank Alexandra Gartmann said the report demonstrated that farmland continued to perform extremely well and reflected the underlying strength of the sector.
“Farmland values have risen strongly in every state of Australia and in many cases to levels not seen before,” Ms Gartmann said.
“Low interest rates and consistent commodity prices, coupled with exceptional seasonal conditions throughout 2020, have provided farmers with capital and an incentive to invest. These factors have proven to be powerful drivers in terms of demand for farmland.”
For the first time, the Australian Farmland Values 2021 report explores the correlation between commodity prices with both national and state median price per hectare.
“Historically, there has been a strong relationship between commodity prices and farmland values, however, 2020 saw an increasing gap between the two, which we first observed in 2016 and which continues to widen,” Ms Gartmann said.
“Many farmers are seeking to expand. This, combined with a smaller pool of sellers, has resulted in strong competition for property. Farmland prices and farmland as an asset class will continue to be keenly watched but increasing asset price alone is no guarantee that agriculture as an industry will continually prosper.
“Positive trends in commodity prices underpinned by strong export demand and a growing domestic market can be tempered by factors such as a changing climate and increasing demands from consumers for transparency within the production and supply chain.
“Experienced buyers with clear heads and an eye on the longer-term will also weigh up geopolitical risks and their potential impact on commodity prices. But even with these risks in mind, it appears that high values for quality farmland will continue to be supported in the short to medium term,”,she said.