FEAR of missing out (FOMO) is one of several factors that led to Western Australia's farmland values increasing by 19.3 per cent in 2020.
Rural Bank's annual Australian Farmland Values report - the most comprehensive report of the country's rural property market - stated that fundamentals including record low interest rates, relatively strong commodity prices, a better-than-expected season and the "FOMO effect" led to the third consecutive year of growth for WA farmland values.
Rural Bank regional manager - south, John Riley said the report highlighted the strong confidence in the rural property sector and the agriculture industry throughout WA.
"With technological advancements and improved management practices, the rainfall that WA farmers had last year and still managed to have a good season in most areas, that amount of rainfall would have been a disaster 25 years ago - so it speaks volumes to our farmers," Mr Riley said.
2020 delivered record high and double digit land values across all regions of the State.
The report stated that the South Coast and Northern agricultural areas, in particular, drove the State's overall median price per hectare growth, as well as the fact that there was an increase in transactions of smaller scale properties.
"The South Coast has been particularly strong, as people have been prepared to pay for the insurance of rain," Mr Riley said.
However, the South West, which is a high rainfall area, experienced less growth in land values compared to the South Coast, which Mr Riley said was likely due to a few factors.
"The South West has a higher intersection of non-croppable land but also the return per hectare for beef compared to wheat, for example, is different," he said.
"It can be difficult to get as significant returns for beef, although beef prices have been very strong lately."
Despite the consistent growth in values across WA, the number of transactions was down by 3.1pc year-on- year (YoY) to 664 sales.
Over a 20-year average the number of sales dropped by 22.2pc from 854 transactions.
Slightly more farmland was traded in 2020, with an increase of 1.1pc reflecting about 526,000 hectares exchanging hands.
"The increase in area of farmland traded came despite a drop in transaction volume and a decrease of 12.7pc in the median parcel size, down to 352.4ha," the report stated.
"This is explained by the increase in large parcels trading in the Northern region which increased the overall area traded for the State."
In total, $995 million of WA farmland was traded in 2020, which was a small decline of 0.7pc, which Rural Bank attributed to fewer transactions.
With commodity prices being one of the factors driving land value growth, historically there has been a strong correlation between commodity prices and farmland values.
However, Rural Bank's analysis noted a divergence in the relationship between commodity and farmland values occurred in 2019 and widened in 2020.
This was driven by declining interest rates, historically low transaction volume, worsening seasonal conditions in 2018 and drought in parts of the State in 2019.
Collectively the commodity price index for WA rose by 2pc in 2020 and Rural Bank claimed that with buying power being strong, suggesting the median price per hectare could continue moving away from the commodity price index in 2021.
"The commodity price index could come under downward pressure from softening grain prices driven by the prospect of another favourable growing season across the country," it wrote.
"Livestock prices may also ease late in 2021 due to increased supply from restocking activity.
"In contrast, wool prices are expected to be stronger after a tough 2020."
Mr Riley said that if the factors driving confidence in the agriculture industry remain, then the strong appetite for farmland is likely to continue.
"Family farmers are generational and they have more of a long-term view of investing in farmland compared to corporates," he said.
"Family farmers can also be more nimble and quicker to act on their feet in purchasing land, whereas corporates have more boxes to tick and have to ensure they will make a return on their investment - that's why family farmers have been the driving force."
South Coast (encompassing lower Great Southern):
For the second consecutive year, the South Coast was crowned the top performing region by Rural Bank based on both YoY median land price growth and 20-year compound annual growth rate (CAGR).
In 2020 South Coast farmland saw a 21.7pc increase in value, recording a median price of $4145 per hectare.
Low supply levels were noted as being a main driver for the region.
The region's 20-year CAGR was 7.8pc.
The volume of sales priced below $2000/ha dropped significantly (by 32.4pc) in 2020 from the previous year.
Properties priced $2000-$4000/ha also saw a major decline of 41.7pc.
"An increase in the number of properties sold within the upper price range coupled with fewer properties sold in the lower price ranges, saw the overall median price per hectare increase in the region," the report stated.
Smaller sized parcels, which tend to fetch higher prices per hectare, accounted for a large portion of the region's sales, therefore supporting the overall per hectare value.
Parcels of 50-250ha represented 40pc of the South Coast's transactions, and the per hectare value for properties of this size had the highest increase, of 12.9pc to $8251.
While large parcels also accounted for 40pc of the region's sales, per hectare values for land of this size declined by 2.3pc to $2124.
Historically, parcels sized 500-750ha had the highest 10-year CAGR at 8.6pc.
Northern WA:
Land values in the Northern region saw a great rebound with an increase of 20.5pc on the back of a 9.3pc decline in 2019.
In 2020 median values for the region were $1310/ha.
The Northern region was one of two to record an increase in transaction volume, of 10.8pc to 103 sales.
Rural Bank claimed this increase was largely driven by better-than-expected seasonal conditions.
Increase in transaction volume was evident across most price ranges, including low, mid and high price ranges.
The largest increase in sales was in the $1500-2000/ha bracket, with 87.5pc more sales, followed by transactions of more than $2500, which rose by 56.3pc.
Activity in both of these brackets was a key driver in the overall growth in median price per hectare.
However sales valued $1000-2000/ha was the main exception to increased transactions, as there were 44.4pc less sales and this price bracket made up just 9.7pc of transactions, compared to 19.4pc in 2019.
Median price per hectare growth was consistent across all property sizes, except those measuring greater than 1500ha.
The main standout was 1000-1500 parcels, which saw an increase in value of 128.2pc YoY, to $1608.
This was the highest YoY growth across any size bracket for all regions.
Properties of 500-1000ha and 50-500ha also showed strong growth of 76.3pc ($1068/ha) and 48.1pc ($2774/ha) respectively.
Properties greater than 1500ha experienced a decline in median price per hectare to the previous year of 20.3pc, placing values at $831/ha.
Parcels within the 50-500ha range recorded the highest 10-year CAGR at 7.6pc, followed closely by 1000-1500ha properties at 6.7pc.
"This shows that there was demand for smaller and medium sized properties, perhaps as additions to existing holdings," the report stated.
Eastern WA:
Low supply levels supported rural land values in the eastern area of the State, with the median price per hectare increasing by 16.6pc to $820/ha.
Transaction activity was down by 23.7pc - the lowest compared to WA's other regions - with 90 sales taking place in 2020.
Rural Bank said the eastern region's median price per hectare growth could largely be attributed to few properties available for sale, which led to increased demand.
The decline in transactions was concentrated across the mid-price range sales from $250-1250/ha, although to varying degrees.
The biggest change in activity was within the $500-750/ha sales, which declined by 54.3pc YoY.
Higher valued properties proved more popular in 2020 compared to 2019, with a rise of 9.3 in sales and accounted for 16.7pc of transactions.
The median price per hectare increased for all parcel sizes, except for the 500-100ha size bracket.
Properties measuring 1000-1500ha led the way for the eastern region, with a YoY increase in value by a massive $68.8pc to $1167/ha, continuing growth from the previous year.
Parcels within this size also had the greatest long-term performance, with a 10-year CAGR of 8.3pc, which reflected a stark contrast to all other sizes which hovered around 0pc.
The smallest and largest size segments (50-100ha and more than 1500ha) both saw steady growth of 11.1pc ($824/ha) and 10.1pc ($596/ha) respectively.
Central WA (encompassing upper Great Southern):
In the fourth consecutive year of growth for the Central region, media prices per hectare rose by 13.3pc to $3314/ha.
It follows a 12.3pc increase in values from 2019.
The growth was widespread, with more than 70pc of municipalities reporting an increase in farmland values.
Unlike the whole State and most other regions, the central region saw an increase in transaction volumes, and a notable one at that of 13.8pc to 264, which was up from 2019's drop of 4.9pc.
The higher half priced properties of $3000/ha or more saw an increase in sales activity, reflecting 58.3pc of sales, which was up from 49.1pc in 2019.
This was particularly evident in transactions valued $5000/ha or more which increased in volume by 80pc and represented 23.9pc of the region's sales.
The only price bracket to experience a decline in the number of transactions was $2000-3000/ha, which dropped by 33.9pc.
Performance by parcel size was very strong across all size segments in 2020, except the largest of 750ha or more.
Medium sized properties were the top performers, with 500-750ha properties seeing median price per hectare growth of 42.8pc for the year to $3253/ha, continuing an upward trend from the previous two years.
This was followed by 250-500ha parcels which increased by 28.5pc to $3125/ha and this parcel size segment has continued to be a driver of median price per hectare growth as it accounted for 48.9pc of sales in 2020.
While parcels of more than 750ha were the only size bracket to see a decline for the region, it was significant with a drop of 28.9pc, leaving values at $1711/ha.
Historically, farmland in the central region has performed well across all size segments and mirrored the figures of 2020, with medium sized properties proving the strongest and less of an appetite for larger properties.
South West:
While the South West recorded the lowest growth in median farmland values per hectare for the State, an increase of 11.5pc was not a figure of disappointment and more than regained the losses of 2019 when prices fell by 6.6pc.
During 2020 farmland in the South West was valued at $9099/ha.
Transactions decreased by 8pc over the year to 104, which was a driving force for the increase in median per hectare values.
The most notable difference in transactions by price bracket was towards lower priced sales, as transactions below $3000/ha dropped by 50pc and deals priced $3000-6000/ha fell by 45.7pc, which contributed to the region's overall median price per hectare increase.
Top priced properties of $15,000/ha or more also dropped, however to a lesser extent of 26.7pc and only accounted for 10.6pc of sales.
Sales priced $6000-9000/ha saw the highest increase in activity, of 28.6pc.
Mid to larger sized properties (120ha or above) recorded growth above the region's median price per hectare.
Parcels of 120-160ha increased in value by 39.7pc to $8117/ha, followed by 160ha+ parcels which went up in value by 13.9pc to $6355/ha.
An increase in medium sized transactions bolstered the region's overall median per hectare growth, with 80-160ha properties accounting for 39.4pc of sales, compared to 24.8pc of sales in 2019.
The long-term desire to own medium sized parcels was also reflected in the 10-year CAGR, with 80-120ha parcels seeing growth of 0.9pc, which was the only size bracket to see an historical increase in value.
