Insights into farmland values
Where does it end? Are we at the top? Can it keep going like this?
These are the questions that we are getting asked over and over… during on-farm inspections, on the phone during the hundredth call of the day or over a cold beer at the town local.
We have heard the term ‘unprecedented’ thrown around a lot over the past couple of years in response to COVID-19, however our real estate market is no different.
Over the past four to five years we have continued to see record-breaking sales all over the country, including in my patch of South Australia. As we all look toward the finish line of 2021, we reflect on the year that has been and where the market will head next.
” While the rural market has remained extremely strong and continued record breaking prices, primarily thanks to low interest rates and high commodity prices, in my experience, a shift is in the air as we continue to manage a market with more buyers than sellers.”
Record breaking prices bring record breaking expectations. And rightly so. The market is no longer willing to pay record breaking prices if the presentation does not fit with the price tag – the expectation of presentation and seasonal handover is now as prevalent as ever. A sniff of the long-awaited buyer resistance may have just started. Well, for rural land anyway.
Having said that, we are also seeing the ‘next generation’ of on-farm management and business minded primary producers who have become comfortable with the high commodity prices and with that, a level of acceptance of increased rural land prices. With industry leaders forecasting high commodity prices being here to stay (again, wouldn’t we all love a crystal ball?!) the younger generation is competitive, hungry for growth and expansion in their business. Whilst we are seeing the red meat industry drive record breaking prices and shape the landscape as the active buyers, the balance and diversification of mixed farming enterprise is key – in a strong market across the board, they go from strength to strength and the rural land prices will reflect as such.
Given the significant growth in land sale prices, rural leases are becoming even more highly sought after and as a result, rural lease values have finally started to climb, with the mid-south east generally reflecting a 2.5 per cent return on investment for leases over the past 12 to 18 months. We will likely see these lease opportunities continue to increase in both value and popularity as we move forward.
And just like that, 2021 is in our rear vision mirror and we start to wonder what 2022 will bring. We can only hope it brings continued high commodity prices, low interest rates, above average rainfall and a strong real estate market across the board.
Article written by Elders rural real estate specialist, mid-south east SA, Grant Schubert.
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