Australian Economy

Australian agricultural land tipped to hold its value amid economic downturn

The price of agricultural land has never been higher and despite the current economic turmoil, analysts and agents believe it will continue to hold its value.

Rural land valuer Tim Lane said high commodity prices plus a good season in many areas were two factors behind the record levels, in some cases up to 30 per cent more than previous prices for the past three years.

“We’ve said this before that people have experienced circa 100 per cent increase in the value of their assets in the last three or four years, with a trend line of low-interest rates, commodity outlook, good seasons, and all the positives that have really boiled the market up to where we are now,” he said.

The ABC has reported high prices paid for farmland across all production types with the sale of the mixed cropping Goondiwindi farm South Callandoon understood to have sold for $100 million last year and gulf country cattle station Miranda Downs selling for well above $160 million last June.

Miranda Downs
A prominent Australian grazing family purchased the one-million-acre Miranda Downs station in the Gulf of Carpentaria.(Supplied: Ray White Rural)

Mr Lane, a national client manager of agribusiness with Herron Todd White, said he did not expect the forecast economic downturn to cause any big dips in the market.

“So, it won’t react as sharp as say the share market or indeed some of the residential commercial markets, which are very much more sensitive to interest rates.”

He said the good financial position of farmers looking to buy more land meant prices should remain high and would not automatically adjust like other sectors.

“The outlook and the balance sheets of the majority of clients are very strong, they’ve had very good capital gain, they’ve got good cash flows, the seasons are running well, for the majority of people around the country,” he said.

Demand still high but FOMO curtailed

Principal at C1 Realty, Danny Bukowski, said demand was high for rural properties, particularly in southeast Queensland.

“We have a shortage of properties coming on the market at present [and] when we list a new property, we have a large amount of inquiry,” he said.

Mr Lane did not believe the current economic climate would impact demand in the rural market.

Man smiling with a checked collared shirt on in front of rocks and agave at Picnic Point in Toowoomba.
Tim Lane says there is going to be good competition among buyers for quality properties.(ABC Rural: Anthea Moodie)

“Demand is strong, Brisbane and the Gold Coast are only one hour away (from Beaudesert) so demand for rural/lifestyle properties is extremely high because of the location and shortage of good land,” he said.

But Mr Lane said the economic climate may just take some of the frenzy out of the market.

“What it might do is take a bit of the FOMO (fear of missing out) out of the market early and some of that urgency to buy, and it may mean some longer-term due diligence,” he said.

Higher interest rates no deterrent 

The Reserve Bank has increased interest rates for the first time in more than 11 years
While interest rates are on the rise, Ken Crompton says the rates are relatively low, meaning a bullish outlook for ag land remains.(Daniel Irvine)

While commentators have pointed to historically low interest rates over the past four years as a contributing factor behind the rural land boom, they do not expect rising rates to slow demand.

NAB senior interest rate strategist Ken Crompton said the cash rate was expected to continue to climb, particularly with soaring inflation.

“We expect the RBA is going to lift the cash rate by another 50 basis points in July, and other 50 basis points again in August and then another smaller hike again before the end of the year, which should put the cash rate somewhere around 2.1 per cent,” he said.

But he said Australia’s rates would remain relatively low in absolute terms.

“Particularly if inflation globally is starting to come off, then you may find that the rates don’t have to rise too much more from then and the end of our forecast period in 2024.”

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