The run of years of rising land prices will likely come to an end on the east coast
- By: "Farm Tender" News
- Agri Political News
- Jul 25, 2019
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This article is bought to you by Australian Fodder Industry Association.
Australian Ag land prices have been on fire for the last five years, but Rabobank sees more smoke and less fire for Ag land prices ahead.
Note: The full report is only exclusively for Rabobank clients
Ad -The Australian Fodder Industry Association or AFIA's Annual Conference is on the 29-31 July. Click here for more info or to become a member today
Ad -The Australian Fodder Industry Association or AFIA's Annual Conference is on the 29-31 July. Click here for more info or to become a member today
Report Summary
Nationally, Ag land prices rose at a 7.0% CAGR over the past five years, mainly driven by a string of favourable seasons that elevated operating profits. However, over the past 12 months, the primary drivers of Ag land prices on either side of the country have diverged. On the east coast, the run of profitability is now coming to an end in many regions, due to drought and a decline in the percentage of farmers intending to buy land. Despite this, prices are still being squeezed upwards by low liquidity in the land market (typical in drought years). However, we expect liquidity will increase in drought-affected states as would-be sellers lose patience with the drought, and the market will be exposed to the underlying poorer operating profits across most sectors. The run of many years of rising strong land prices will likely come to an end on the east coast.
Ad -The Australian Fodder Industry Association or AFIA's Annual Conference is on the 29-31 July. Click here for more info or to become a member today
Ad -The Australian Fodder Industry Association or AFIA's Annual Conference is on the 29-31 July. Click here for more info or to become a member today
In the west and south, the primary driver of land prices was demand, fuelled by sustained operating profits. Falling liquidity has proven to be a challenge for prospective purchasers, applying additional upward pressure to prices. Strong demand will continue to support further price growth, albeit on a slightly softer trajectory than recent years.
Across the board, a contraction in land prices is unlikely. Farmer balance sheets generally remain strong, and we see support from many macro forces such as: a low and falling cost of funds; a weak and falling currency; and a favourable outlook for most commodities.
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