Cashed up WA farmers 'remain acutely aware of the vagaries of farming', agents say

The median price per hectare rose to $6929/ha in 2022.

Prices for farm land across Australia are continuing to stun experts.

The value of rural property has zoomed way past other investment opportunities such as the share market or residential real estate.

According to a deep dive into farm sales by one of the nation's leading rural real estate firms, Elders Ltd, farm land values jumped another 18.1 per cent last year on top of a 18.2pc rise the year before.

The national median price per hectare rose to $8142/ha from $6891/ha in 2021.

The value of farms is basically doubling every seven years.

In Western Australia, the heat came off farm land prices in 2022 with a still healthy rise of 6.1pc taking the median price per hectare to $6929/ha.

This came on the back of the stellar 41pc increase in 2021.

The Central and Avon Midland regions performed strongly.

Transaction volume declined sharply down by 24.5pc to 670.

The median price per hectare fell by 8.4pc at the end of last year.

The state result was driven by an increased proportion of larger parcels making up the overall mix, Elders' analysts said.

However, at regional level there were strong increases in the Avon-Midland and South West regions.

Transaction volume remained relatively unchanged, with fewer sales in the Avon-Midland region and an increase in the Eastern and Great Southern regions.

AROUND THE NATION:

Elders senior rural real estate executive (Western Australia) Simon Cheetham said anecdotally, prices continue to trend upwards across WA.

He said a number of headline sales are setting new benchmarks for the respective areas throughout the latter half of 2022 and into 2023.

"Cautious optimism remains the order of the day," Mr Cheetham said.

READ MORE: See our list of the biggest property sales for 2022

"As a generalisation, farmers across WA are in a strong financial position with aspirations to continue to expand, however all remain acutely aware of the vagaries of farming."

He said farms with scale in the coveted medium to high rainfall cropping zones of WA are particularly scarce with the carbon sector having a growing influence on the property market.

"A handful of sellers across the state have taken the decision to offer their properties to market in March 2023, which is later than the norm for broadacre properties, however the majority of these have received strong interest with many sales pending."

Even though farm prices are staying sky high, there is much less land for sale, helping to drive the momentum along with stellar agricultural commodity returns.

Elders' experts said the landscape for rural property has already changed this year.

There remains a strong correlation between commodity prices and farmland values.

At this year's ABARES conference, Australian farm production was found to have boomed beyond expectations, heading to a record value of $90 billion for 2022-23.

But drier seasons, increasing export competition and tighter global economic times are returning to chew into farmgate earnings.

There is also some uncertainty on how the season will unfold with the end of the La Nina climate influence and predictions of a developing El Nino.

Elders general manager (farmland agency and agribusiness Investments) Mark Barber said "some volatility" had crept into agricultural operating conditions.

He said it was still likely the relative performance of rural land as an asset class compared to other investment options is playing a strong role in investment decisions.

"Land holders are reluctant to sell out of agriculture unless they see viable investment options in other asset classes. Similar sentiment is held by buyers.

"Ongoing volatility in financial markets is likely to be supportive of farmland values.

"Cost pressures continue to erode margins, but there is limited evidence of a sustained change in demand for food and fibre.

"We are seeing rising demand for farmland that can provide carbon sequestration and biodiversity credits," Mr Barber said.

"The farmland based carbon and environmental 'services; market will continue to evolve in 2023 and is likely to have an increasing impact on farmland values."

The volume of farm sales fell markedly over 2022 by 37.5pc to 5794 sales totalling $11.5 billion.

Elders market insights specialist, Matt Ough, found prices were still incredibly strong in most markets compared with 2021.

Mr Ough said it highlighted the resilience of rural property as an asset class.

Dwelling values in Australia fell 5.3pc in 2022, marking the largest calendar year decline in home values since 2008.

Meanwhile, the All Ordinaries share market index fell 8.2pc for the calendar year.

In contrast, rural property prices surged to new heights in every state and territory, Mr Ough said..

Mr Barber said the rural property market is now looking for direction in 2023.

"Land values continued to increase, and total property turn over declined across the year," he said.

Historically low interest rates, sound commodity fundamentals and a run of good seasons for most have buoyed land values, and the market is waiting to see how 2023 will unfold.

"The market will take cues from the relative performance of agriculture compared to other investment options, fundamental support for commodity prices and the impact alternative land uses such as renewable energy, biodiversity offsets and carbon sequestration opportunities," Mr Barber said.

The Northern Territory and South Australia recorded the strongest growth for farm prices for 2022.

Elders says it sources data for every rural property sale above 40 hectares in Australia from Corelogic before undertaking in-depth analysis to remove non-agricultural land uses and statistical outliers.

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