Elders Rural Property Update has been released today, analysing the movement of rural property values for quarter four of 2022, from October 1 to December 31. In addition to the quarterly analysis this edition covers calendar year performance comparing 2022 to 2021.
Prices were incredibly strong in most markets compared to 2021, highlighting the resilience of rural property as an asset class at a time where other asset classes have struggled.
Dwelling values in Australia fell 5.3* per cent (pc) in 2022, marking the largest calendar year decline in home values since 2008. Meanwhile, the All Ordinaries share market index fell 8.2 pc** for the calendar year. In contrast, rural property prices surged to new heights in every state and territory covered by the Elders Rural Property Update.
Elders General Manager Farmland Agency & Agribusiness Investments, Mark 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. The trends suggest that historically low interest rates, sound commodity fundamentals and favourable seasonal conditions have been fully factored into land values, and the market is looking for some direction as we move into 2023.
“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.”
Key points for the calendar year 2022:
- National median price per hectare (ha) increased by 18.1 pc to $8,142 per ha, following an 18.2 pc gain in 2021.
- Transaction volume declined significantly, decreasing by 37.5 pc in 2022 to 5,794 totalling $11.5 billion.
- The five-year compound average growth rate (CAGR) was 10.5 pc to the end of 2022, indicating the median price per hectare is doubling every 6.9 years.
The Northern Territory (NT) and South Australia (SA) recorded the strongest growth in median price per hectare for the 2022 calendar year.
In the NT prices increased by 59.5 pc to $2,267 per ha driven by an increased volume of high-priced parcels from the Top End region. Meanwhile, SA recorded growth of 46.9 pc in 2022 reaching $6,346 per ha after two years of flat price growth at state level, the increase was driven by the South East and Yorke regions.
The calendar year results showed a strong increase in price for New South Wales and Victoria, up 19.9pc to $8,508 per ha, the fourth consecutive year of double-digit increases. Top performing regions included West and North West NSW. In Victoria, median price per hectare was up by 22.5 pc to $12,937 per ha, the second consecutive year of growth above 20 pc.
The significant decline in transaction volume for the calendar year was most pronounced in Tasmania with a decline of 48.9 pc followed by Victoria down by 45.9 pc. Transaction volume in most states came off a high set in 2021 after a flurry of sales driven by drought relieving rains.
Nationally, median price per hectare increased by 11.2 (pc) in Q4-2022, taking the quarterly median price to $9,019 per ha. Transaction volume declined by 1.7 pc, totalling 1,334 in Q4-2022.
At state level, the NT and Tasmania recorded the highest growth in median price per hectare in Q4-2022, up 59.6 pc and 36.5 pc respectively, primarily driven by a shift in transaction mix favouring high priced parcels in the Top End region of the NT and the Northern region of Tasmania.
Elders recognises that the landscape for rural property has changed in 2023 with many buyside factors softening and others emerging as potential drivers of growth.
“Whilst there is some volatility creeping into agricultural operating conditions, it is likely that the relative performance of rural land as an asset class compared to other investment options is playing a strong role in investment decisions,” said Mr Barber.
“That is, 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. The FAO food price index has fallen during 2022 but remains well above historical levels, second only to the peak in real terms in the mid-1970s. As reported in previous editions, there is a strong correlation between commodity prices and farmland values.
“We are seeing rising demand for farmland that can provide carbon sequestration and bio-diversity credits.
“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”, Mr Barber concluded.
Elders source transactional level 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. Analysis and commentary is provided by Elders’ national network of rural real estate experts.
Sources: *Corelogic, **Yahoo Finance.