WA streaks ahead on farmland price growth

Western Australia has shown an exceptional rise in values, as part of a decade of unbroken growth nationally, Rural Bank's Australian Farmland Values 2024 report states.

But the company's head of development, business and agribusiness Andrew Smith said the bank's latest analysis clearly showed the national market has changed from an unprecedented period two to three years ago.

"Buyers have been more considered in their purchasing decisions following the shifts in the operating environment,'' Mr Smith said.

"At the same time, sellers maintained high price expectations and have generally been willing to see properties sit on the market for extended periods."

Mr Smith tipped the key drivers of farmland values - weather conditions, commodity prices and interest rates - seemed set in a "holding pattern" in 2024, as a result, it was likely Australia's farmland market values would plateau.

"There is little to suggest there will be a widespread resurgence in demand for farmland purchases nor a greater pressure to sell for prices below recent levels,'' he said.

"Rather, a continuation of firm, but not rampant, demand coupled with ongoing tight supply should see farmland values hold near current high levels."

Rural Bank's Australian Farmland Values 2024 analysis draws on data from every farmland transaction across Australia over the past 29 years.

That amounts to almost 290,000 transactions accounting for 345 million hectares of land traded at a combined value of $215 billion.

It found an increase in the national median price per hectare of 6.4pc in 2023 to $9575/ha.

This was the 10th consecutive year of growth, but the second lowest growth rate in the decade, and marked a significant deceleration of year-on-year growth from the preceding five years.

The report states growth peaked in 2022 when the median price rose by 27pc.

Over the past 10 years, the national median price has tripled, rising by 201pc at a compound annual growth rate of 11.6pc.

Over a longer time horizon, the national median price had a 20-year compound annual growth rate of 8.4pc.

WA had the strongest growth rate at almost 33pc, and was the only State to see median farmland prices accelerate from 2022.

Eight of Australia's top 10 growth regions last year were in WA, South Australia or Tasmania.

The analysis found transaction volumes were falling - by 18pc nationally in 2023 to 6763 sales - taking transaction volume to its lowest level in the past 29 years.

The trend was most extreme in the Eastern States, and WA was the only State to record an increase in 2023, up 15pc.

Rural Bank said the trends were closely correlated with the net values of farm production (NVFP) - which were at the highest on record for the past three financial years.

"This exceptional run of high-earning years fuelled a period of extremely strong appetite for farmland purchases while also creating very little pressure to sell,'' the report states.

"As such, farmland values were driven higher at a rapid pace.

"The estimated NVFP per farm for 2023-24 is less favourable as the impacts of lower commodity prices, reduced crop production and high interest expenses and input costs are expected to see NVFP per farm fall back to its lowest level since 2009-10."

But in good news, it was likely there were sufficient cash reserves onfarm to counteract any large fall in income in 2023-24 to prevent a significant correction in farmland values.

WA has become the national leader in farmland value growth, Rural Bank said.

The median price per hectare reached a record high of $6225/ha in 2023, following a significant increase of 32.6pc year-on-year.

Price growth was seen in all WA regions, except the Great Eastern.

In the northern region, demand for quality cropping properties continued to exceed supply.

Land-use changes towards solar and wind farms pushed up prices on the eastern fringes of the northern Wheatbelt - with a doubling in value of some properties since 2022.

Prices in the South West rebounded, solidifying its status as the State's top-priced farmland region and the Great Southern continued its upward trend.

In the Central region, 50-200h properties fell in value year-on-year but this was offset by increased median value across all other land parcel sizes.

Large properties greater than 900ha made up the majority of sales in the Great Eastern - these typically have lower median values per hectare which influenced the region's median price down 12pc year-on-year.

"Notably, 2023 marked the sixth consecutive year of growth in WA's farmland values, highlighting the sustained strength of the market,'' the report states.

"Over the past six years of growth, the State's median price more than tripled, up 222pc from 2017."

WA's five and 10-year compound annual growth rates topped the nation.

Bucking the national trend, farmland transactions in WA also increased, jumping 15pc to 647.

This reversed a four-year decline in sales volumes.

"WA farmland prices notched another year of gains in 2023, reaching record highs for the sixth consecutive year,'' said Rural Bank's regional manager agribusiness in WA, Joe Emmens.

"Demand remained robust across most regions, with both family farms and corporate buyers seeking opportunities.

"Interest was also seen coming from Eastern States buyers potentially reflecting WA's value proposition."

The South West and Great Southern regions saw WA's largest increase in sales.

The Central region recorded a more modest rise in comparison, while the Avon-Midland remained unchanged.

The Northern region was the only one to see a drop in sales.

"WA stands alone as the only State experiencing accelerated growth in farmland values,'' the report states.

"Whether this reflects a natural lag behind the Eastern States, or an undervalued market remains to be seen."