NSW farmland prices move west, south

Rural Bank's Australian Farmland Values 2022 report shows prices in NSW's western and southern regions grew 22.4 and 28.2pc respectively. The south east notched up 18.6pc.

It was much more subdued in the north with 5.5pc and the median price per hectare in state's central region actually fell 0.5pc.

The two slower regions accounted for a whopping 81.6pc of transactions in the state, weighing heavily on NSW's median price.

Rural Bank senior agricultural analyst and report author Michael Curtis said he thought it unlikely the northern and central regions had neared a price ceiling.

"The market's had a good run for a few years with some really strong growth and so, rather than calling it a ceiling, I'd say it's maybe just a consolidation of the market because it's just not able to keep up the same rate," he said.

"It could also be that demand's shifting to some other areas."

The obvious target for farmers seeking real estate value is the western side of NSW.

"If you're willing to look beyond your local area, you probably do see some more value out west with lower prices relative to the more coastal areas, so I think that would be a factor," Mr Curtis said.

Northern NSW farmland prices had plateaued at around $6000/ha over the last two years, where he said there had been a big increase in the number of larger properties sold.

Because larger properties tended to have a lower price per hectare, they'd had an impact on the average, even overshadowing the burgeoning tree-changer effect.

Across the state, farmland sales totalled $6.1 billion in 2021, up 62.7pc from 2020. It wasn't just the impact of big properties coming onto the market, either, with 29.4pc more farmland transactions in NSW in 2021 compared to 2020.

Even so, NSW lagged far behind the stellar growth rates of its southern and northern neighbours. Queensland registered 31.3pc and Victoria, 30.4pc.

There was a marked difference between the adjoining southern Queensland and northern NSW regions, which Mr Curtis explained were quite different.

"South Queensland is that smaller pocket in the southeast of the state, whereas northern NSW extends a fair way inland to the west, so it's picking up some of those bigger properties," he said.

"Southern Queensland is really impacted by the increased activity of smaller properties and that was what contributed to driving the median price because they're significantly higher in the last year."

The impact of smallholdings shouldn't be underestimated in NSW, though, Mr Curtis said.

The median price of parcels of less than 100ha in northern NSW was about $10,000/ha.

Across the entire state, the number of transactions priced above $12,500/ha nearly doubled, overtaking the $2,500-$5,000/ha range to become the most common category.

The smallest parcels captured in the data for Australian Farmland Values 2022, the 30-50ha category, had the fastest growing prices of all NSW farmland, racing ahead by 24pc to a median $12,712/ha.

Those smaller properties grew in dominance in southeast NSW, too, but a lack of properties with scale also saw market movement, Rural Bank Goulburn's John Scarlett said.

"The number of large-sized properties going to auction in 2021 fell short of demand," he said.

"As a result, there was a high level of competition for these properties with many being sold before auction.

"2021 also saw a lot of buyers looking to move out from Sydney and Wollongong, with many smaller acreages changing hands.

"If commodity prices and interest rates hold, expectations are that farmland values will continue to see strong growth with a bounce back expected in the south-east coast property market as it regains strength following recovery from the 2020/21 bushfires."

Nationally, farmland prices grew 20pc in 2021.

The median price per hectare soared to $7087 a hectare in 2021, making it the biggest national price rise in dollar terms ever recorded in the 27-year history of Rural Bank's Australian Farmland Values report. It's also the largest rise in percentage terms since 2005.

Western Australia led the pack at 36.3pc, Queensland came in second with its 31.3pc, then Victoria, 30.4pc.

Markets were far less bullish in the remaining states, with SA recording 8.4pc, NSW at 8.3pc and Tasmania, 7.6pc.

Rural Bank general manager sales partnerships and marketing Simon Dundon said the long-term performance of the market was impressive.

"Overall, growth in farmland values has exceeded residential property prices in Australian capital cities, which have had a lower compound annual growth rate of 5.4pc over the past 18 years," Mr Dundon said.

"Farmland value growth also outperformed the ASX 200 over the past 20 years, which has CAGR of 4.0pc, making a strong case for farmland to be seen as an asset class in its own right."

Rural Bank predicted a rosy national outlook.

"Our overall view for 2022 is that there's still plenty of demand to sustain what's been a competitive marketplace, coming off the harvest of a record winter crop at pretty good prices and the livestock sector is going really strongly as well," Mr Curtis said.

However, he said, rising interest rates and higher input costs would both dampen price growth.

"We'll maybe start to see the market slow down a bit but, at the same time, there's still plenty of demand," Mr Curtis said.

"I don't think supply is going to rise again, as it did in the last couple of years, so that points to another increase in values from a national perspective but regional trends can always be a little bit different."