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We have never seen so many people move to regional Australia and such high agricultural production. It is therefore not surprising that Rural Bank recorded a 20 per cent rise in Australian farmland price per hectare in 2021. Now sitting at just under $7,100 per hectare, the growth rate was the biggest percentage increase since 2005 and the largest dollar increase since the mid 1990s.
The increase comes off particularly strong conditions. In 2021, agricultural production hit record highs as forecast by the Department of Agriculture, Water and Environment. In 2022 they forecast that this run will continue with Australian farm production expected to exceed $80 billion after experiencing the sharpest rise ever recorded.
The other driver of price growth has been the popularity of lifestyle properties. Money and people have poured into regional areas and this is also a major component of price growth of farms. While capital cities shrunk, regional areas didn’t. Although the movement of people from capital cities to rural areas is likely to slow now that lockdowns have ended, international migration is starting up again which is likely to balance population growth.
What’s the outlook for farm land? With an interest rate rise announced today, it is likely that price growth for all property types will start to moderate. One buyer group which has been missing over the past two years may return. International investors are keen on Australian farms and have been relatively quiet since the start of the pandemic. Open borders has the potential to bring them back, and combined with continued strong agricultural conditions, are likely to lead to a continual increase in farm prices.
