Victorian farm sales still breaking records, but some signs it is levelling out

The value of rural property has zoomed way past other investment opportunities such as the share market or residential real estate.

According to a deep dive into farm sales by one of the nation's leading rural real estate firms, Elders Ltd, farm land values jumped another 18.1 per cent last year on top of a 18.2pc rise the year before.

The national median price per hectare rose to $8142/ha from $6891/ha in 2021.

The value of farms is basically doubling every seven years.

Prices rose across Victoria by 22.5pc to $12,937/ha, the second consecutive year of growth above 20pc.

Elders' analysts said this was driven by a sharp decline in sales down by 45.9pc to 722.

Most of the decline was in the larger parcel size range which shifted the transaction mix towards higher priced smaller parcels.

The median price per hectare eased by six per cent at the end of the year, driven by mixed performance across regions with Gippsland and South Central contracting.

The number of sales rose sharply up by 17pc in the final quarter of the year, shifting the transaction mix in favour of larger parcels in the Wimmera-Mallee and south-west.

Elders state real estate manager (Victoria/Riverina and Tasmania) Nick Myer said the opening sales of 2023 had begun well "with a healthy volume of assets presented to market which are being met with strong demand".

"Disruptions as a result of seasonal conditions in the second half of 2022 saw opportunities planned for market postponed and subsequently being presented in the first quarter of 2023," Mr Myer said.

He said while quality assets continue to be met with strong demand and are achieving excellent results, there are isolated instances where the market has confirmed signs of levelling out.

Even though farm prices are staying sky high, there is much less land for sale, helping to drive the momentum along with stellar agricultural commodity returns.

Elders' experts said the landscape for rural property has already changed this year.

There remains a strong correlation between commodity prices and farmland values.

At this year's ABARES conference, Australian farm production was found to have boomed beyond expectations, heading to a record value of $90 billion for 2022-23.

But drier seasons, increasing export competition and tighter global economic times are returning to chew into farmgate earnings.

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There is also some uncertainty on how the season will unfold with the end of the La Nina climate influence and predictions of a developing El Nino.

Elders general manager (farmland agency and agribusiness Investments) Mark Barber said "some volatility" had crept into agricultural operating conditions.

He said it was still likely the relative performance of rural land as an asset class compared to other investment options is playing a strong role in investment decisions.

"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.

READ MORE: See our list of the biggest property sales for 2022

"Cost pressures continue to erode margins, but there is limited evidence of a sustained change in demand for food and fibre.

"We are seeing rising demand for farmland that can provide carbon sequestration and biodiversity credits," Mr Barber said.

"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."

The volume of farm sales fell markedly over 2022 by 37.5pc to 5794 sales totalling $11.5 billion.

Elders market insights specialist, Matt Ough, found prices were still incredibly strong in most markets compared with 2021.

Mr Ough said it highlighted the resilience of rural property as an asset class.

Dwelling values in Australia fell 5.3pc in 2022, marking the largest calendar year decline in home values since 2008.

Meanwhile, the All Ordinaries share market index fell 8.2pc for the calendar year.

In contrast, rural property prices surged to new heights in every state and territory, Mr Ough said..

Mr 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," he said.

Historically low interest rates, sound commodity fundamentals and a run of good seasons for most have buoyed land values, and the market is waiting to see how 2023 will unfold.

Elders says it sources 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.

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