The price of farmland has never been higher and despite the current economic turmoil, analysts and agents believe it will continue to hold its value.
- Australian farmland prices are at record highs and demand also remains high
- Appraiser says high prices will persist, but economic downturn could reduce frenzied buying
- Rising interest rates unlikely to slow rural housing boom
Rural land assessor Tim Lane said high commodity prices and a good season in many areas were two factors behind the record highs, in some cases up to 30% higher than prices precedents for the past three years.
“We’ve said it before, people have seen about a 100% increase in the value of their assets over the last three or four years, with a low interest rate trend line, outlook on raw materials, good seasons and all the positives that really boiled the market to where we are now,” he said.
The ABC reported high prices being paid for farmland across all types of production with the sale of the Goondiwindi mixed-crop farm, South Callandoon, which was reportedly sold for $100million last year and the station of gulf country Miranda Downs sold for well over $160 million last June.
Mr Lane, a national agribusiness client manager with Herron Todd White, said he did not expect the expected economic downturn to cause sharp declines in the market.
“So it won’t react as sharply as, say, the equity market or even some of the residential commercial markets, which are much more interest rate sensitive.”
He said the good financial situation of farmers looking to buy more land meant prices had to stay high and would not automatically adjust like in other sectors.
“The prospects and balance sheets for the majority of customers are very strong, they have made very good capital gains, they have good cash flow, the seasons are going well, for the majority of people across the country,” did he declare. said.
Demand still high but FOMO reduced
C1 Realty director Danny Bukowski said demand was high for rural properties, particularly in southeast Queensland.
“We have a shortage of properties coming onto the market right now [and] when we list a new property, we get a lot of inquiries,” he said.
“Demand is high, Brisbane and the Gold Coast are only an hour away (from Beaudesert) so demand for rural/lifestyle properties is extremely high due to location and scarcity of good land.”
Mr. Lane said he did not believe the current economic climate would impact demand in the rural market.
But that may just take away some of the market frenzy.
“What that might do is take some of the FOMO (fear of running out) out of the market early on and some of that urgency to buy, and that may mean longer-term due diligence,” he said. -he declares.
Higher interest rates are not a deterrent
While commentators have pointed out that historically low interest rates over the past four years have contributed to the rural land boom, they do not expect rising rates to dampen demand.
NAB’s senior interest rate strategist Ken Crompton said the cash rate is expected to continue to climb, especially with soaring inflation.
“We expect the RBA to raise the cash rate by another 50 basis points in July, and another 50 basis points in August, then another smaller hike before the end of the year, which should put the rate cash somewhere around 2.1 percent,” he said.
But he said Australian rates would remain relatively low in absolute terms.
“Particularly if global inflation starts to decline, you may find that rates don’t have to rise too much from there and at the end of our forecast period in 2024.”
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