Land prices climb high

De­mand for qual­ity in­creases

Central Queensland News - - RURALWEEKLY - KIRILI LAMB kirili.lamb@ru­ral­weekly.com.au

DE­MAND for qual­ity agri­cul­tural land con­tin­ues to out­strip avail­abil­ity, driv­ing an up­wards trend on prices across Aus­tralia, ac­cord­ing to a re­cent Rabobank re­port.

The fi­nan­cial in­sti­tu­tion’s in­au­gu­ral Aus­tralian Land Price Out­look, ti­tled No Sum­mit in Sight – Ag Land Prices to Climb Higher, was re­leased at the end of Au­gust.

The re­port’s au­thor, Rabobank agri­cul­tural an­a­lyst Wes Le­froy said agri­cul­tural land prices were set to con­tinue to climb over the next two years, although the over­all rate of price growth was pre­dicted to slow – im­pacted by weak­en­ing eco­nomic ‘tail­winds’ and cur­rent ad­verse sea­sonal con­di­tions in some parts of Aus­tralia.

“While agri­cul­tural land prices are in­flu­enced by macro-eco­nomic fac­tors, Aus­tralian land mar­kets are highly re­gion­alised,” he said

The com­mon fac­tor has been that, across most agri­cul­tural re­gions, de­mand for qual­ity land con­tin­ues to out­strip mar­ket avail­abil­ity.

“This is the driv­ing force be­hind land prices con­tin­u­ing to move higher and we con­sider this de­mand/ avail­abil­ity im­bal­ance to be the over­ar­ch­ing driver as to why land prices will con­tinue to in­crease over the next two years, al­beit at a lower level of growth with a de­crease of sup­port from macro-eco­nomic fun­da­men­tals,” Mr Le­froy said.

By the end of 2017, the re­port found, the me­dian price for agri­cul­tural land in Aus­tralia had risen to A$2278 per hectare, at a com­pound an­nual growth rate (CAGR) of 2.5 per cent over 10 years. Strong­est growth had been shown in Tas­ma­nia, Vic­to­ria and West­ern Aus­tralia re­spec­tively. Much of the growth in prices paid for farm­ing land had been driven by rises in farm­ers’ op­er­at­ing profits, Mr Le­froy said, sup­ported by pos­i­tive macro-eco­nomic con­di­tions for the agri­cul­tural sec­tor.

“Na­tion­ally, the five-year (2013-17) av­er­age re­ported farm op­er­at­ing profit in 2017 was just un­der seven times larger than a decade ear­lier (for 2003-07),” he said.

“And this growth has pri­mar­ily come from broad-acre crop­ping and mixed live­stock farms.”

A fur­ther fac­tor con­tribut­ing to price growth had been mar­ket in­ter­est from cor­po­rate buy­ers.

“Cor­po­rate in­ter­est in ag land has also in­creased, adding com­pe­ti­tion for farm­land pur­chases,” he said.

RE­GIONAL PIC­TURE

QUEENSLAND and New South Wales con­tinue to demon­strate mar­ket in­flu­ences driven by drought and dry con­di­tions.

In NSW, all agri­cul­tural ar­eas showed land price in­creases across the pe­riod from 2015-17, how­ever, the re­port saw that this growth would soften, with the cur­rent dry im­pact­ing op­er­at­ing costs. This would slow de­mand for land pur­chases.

How­ever, high crop­ping and beef profits, and “in­tense com­pe­ti­tion for tightly held land will con­tinue to push prices higher”.

In Queensland, beef prices have con­tin­ued to sup­port land prices, as has strong in­ter­est in qual­ity arable land.

Ru­ral Weekly spoke with sev­eral ru­ral prop­erty spe­cial­ists across the state to gauge a sense of re­gional mar­kets.

James Croft is prin­ci­pal/ di­rec­tor of Ray White Ru­ral, Pittsworth, on the Dar­ling Downs.

Mr Croft said the drought was not hav­ing a large im­pact on land prices, with ru­ral pro­duc­ers largely able to ab­sorb the costs of a poor win­ter crop.

“As time goes on, and if there’s no sum­mer crop and a low sup­ply of wa­ter, that’s where you could see con­fi­dence do a down­ward trend,” Mr Croft said.

Sev­eral re­cent sales in the re­gion have re­flected a con­tin­ued in­ter­est in qual­ity ir­ri­ga­tion and dry­land prop­er­ties.

“Our prime Dar­ling Downs farm­ing coun­try hasn’t gone down in value. We’ve done some record deals in the last three to six months,” he said.

He cited one re­cent sale of a blue-chip ir­ri­ga­tion prop­erty that had fetched $9000 per acre, and a dry­land op­er­a­tion that had come in at $4300/acre.

Mr Croft said prices in his re­gion were be­ing main­tained by com­pe­ti­tion for qual­ity land and high com­mod­ity prices, with the pri­mary prop­erty in­vest­ment be­ing driven by fam­ily-based agribusi­nesses.

He said cor­po­rate in­ter­est in land still in­flu­enced price growth, although there had been a ta­per­ing of in­ter­est over the past six months, while in­ter­est from Chi­nese agri­cul­tural com­pa­nies had ta­pered in the past 12–18 months.

This per­cep­tion was also the ex­pe­ri­ence of Dar­ryl Lang­ton, ru­ral prop­erty spe­cial­ist with Land­mark Har­courts Roma, ser­vic­ing the Mara­noa, War­rego and West­ern Downs re­gions.

He said that, par­tic­u­larly in the eastern parts of his re­gion, a be­low av­er­age win­ter was off­set by good rain­fall over the pre­ced­ing sum­mer.

Good pas­ture and wa­ter re­serves were mak­ing the re­gion at­trac­tive to buy­ers out of north­ern and cen­tral NSW and west­ern Queensland.

“It’s added buy­ers into our mar­ket­ing cam­paigns from ar­eas where we nor­mally re­ceive some in­quiry, but it’s cer­tainly in­creased the vol­ume of in­quiry,” Mr Lang­ton said.

“Our mar­ket has been in a strong up­wards cycle here since 2014, and the mar­ket con­tin­ues to gather mo­men­tum.”

Small through to large fam­ily-based agribusi­ness look­ing to ag­gre­gate with neigh­bour­ing prop­er­ties also con­tin­ued to be strong play­ers in the re­gional agri­cul­tural prop­erty mar­ket.

A mi­nor el­e­ment in the lo­cal mar­ket had been some in­vest­ment in mulga land by play­ers in the car­bon mar­ket.

The Wide Bay Bur­nett was shown in the Rabobank re­port to be in­di­cat­ing a strong up­wards trend.

Baden Lowrie, ru­ral prop­er­ties spe­cial­ist with El­ders Ru­ral Bund­aberg said a strong driver of growth in the Bund­aberg agri­cul­tural prop­erty mar­ket had been around the de­vel­op­ment of macadamia as a sig­nif­i­cantly grow­ing hor­ti­cul­tural sec­tor in the re­gion.

“The key fo­cus in the last 18 months to two years has been suit­able larger parcels of land for macadamia de­vel­op­ment,” Mr Lowrie said.

“With the lower sugar prices, there’s not too many par­ties in­ter­ested in sugar cane prop­er­ties for sugar cane pro­duc­tion, but they are look­ing at suit­able soil types, and larger scale ar­eas with ir­ri­ga­tion sup­ply for macadamias.”

He es­ti­mated that

90 per cent of sugar cane farms re­cently sold have been tran­si­tioned to macad­maia pro­duc­tion. In­vest­ment in this sec­tor was com­ing from both fam­ily and cor­po­rate agribusi­nesses.

Mr Lowrie works across an area ex­tend­ing north to Biloela and west to Eidsvold, and saw a sim­i­lar pat­tern to other ru­ral prop­erty spe­cial­ists in terms of in­vest­ment in graz­ing prop­er­ties, with com­pe­ti­tion strong for qual­ity pas­ture land with wa­ter, as peo­ple looked to cre­ate ad­di­tional or re­gion­ally di­verse graz­ing op­tions.

RE­PORT OUT­LOOK

RABOBANK re­port au­thor Wes Le­froy said na­tion­ally, growth in land prices would likely weaken.

“Look­ing for­ward, we do ex­pect the tail­winds from macro-eco­nomic fun­da­men­tals that have sup­ported the growth of land prices to weaken,” Mr Le­froy said.

“The cost of fund­ing for banks is ex­pected to rise so this would de­crease the rel­a­tive bor­row­ing ca­pac­ity for farm­ers.

“In ad­di­tion, a fall in pro­duc­tion across some ma­jor agri­cul­tural com­modi­ties, fol­low­ing a num­ber of high-pro­duc­tion years, will im­pact op­er­at­ing profits, par­tic­u­larly with the cur­rent dry con­di­tions in eastern Aus­tralia.”

The im­pact of trade ten­sions be­tween China and the US was also a po­ten­tial “down­side risk” for the agri­cul­tural land mar­ket out­look.

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