Australian Agricultural Land Price Outlook: A New Phase
2020 signals the beginning of a new phase in Australian land markets.
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Nationally, land prices have risen at an 8.8% CAGR over the past five years, with the main growth mainly concentrated in 2017 and 2018. The string of high-profit years that fuelled demand for expansion and limited the number of properties on the market across the country has now concluded. This resulted in lower land price growth in 2019 than in previous years.
Rabobank believes 2020 signals the beginning of a new phase in land markets across the country. This has been prompted by the east coast transitioning to drought recovery, trailing effects from high-profit years beginning to subside, and the negative impact of the ongoing economic crisis on farm revenues and confidence. “It is the beginning of a period of low, if any, growth in the next 18 months. While median prices in some regions may see a contraction over the next 18 months, we believe macro forces, such as a low cost of funds and a weak and falling currency, will prevent a major downward correction," according to Wesley Lefroy – Agricultural Analyst.
The relationship between price and output is often distorted, causing median prices to either overshoot or undershoot productive potential. This year, Rabobank has teamed up with Digital Agriculture Services (DAS) to help clients refine their buying strategies and deepen their knowledge of the relationship between land price and output potential.