Demand drives up farmland values

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TRENDING UP: Mount Gambier-based Rural Bank agribusiness relationship manager Simon O'Leary believes growing interest from many sheep and cattle operations looking for expansion opportunities was a major driving force behind the region's median price per hectare.

THE median price per hectare of farmland in the Limestone Coast continues to soar, fuelled by strong livestock prices and an appetite for expansion.

The latest Australian Farmland Values report – released earlier this month by Rural Bank – showed the median price for farmland in the South East district – which extends from the southern coastline into the northern Murray and Mallee regions – grew 23.4pc in 2019.

According to the findings, it was the fourth consecutive year of growth for the region, with the median price per hectare almost doubling during that time.

The growth followed a 10-year period between 2005-15 when the median price was volatile but showed no trend.

Comparatively, South Australia’s median price per hectare increased by 18.4pc in 2019, a 67.7pc increase over the last four years.

More than $756m of farmland was traded across the state last year, or an estimated 218,610 hectares across 693 transactions.

Research revealed transaction numbers declined by 12.7pc across the South East region, the second consecutive year of lower transactions, but remained 5pc above the 10-year average of 275 annual transactions.

Welcoming the rise in land prices, Rural Bank Mount Gambier agribusiness relationship manager Simon O’Leary said a major driving force behind the increase was growing interest from sheep and cattle operations looking for expansion opportunities.

“Favourable seasonal conditions, good commodity prices and a strong uplift in land values have enabled more graziers to be in a position to consider expansion,” Mr O’Leary explained.

“Stronger demand from graziers has been coupled with heightened interest from outside the area as farmers from other regions seek to extend seasons in a different rainfall zone by diversifying their holdings.”

The report revealed the 2019 decline occurred almost exclusively in the lower price range of less than $2000/ha which had 49.6pc fewer transactions than 2018 – a trend evident in almost all municipalities in the region.

Offsetting this impact was an increase in transactions across the higher price range brackets, with growth in land sales priced greater than $8000/ha most evident in the Wattle Range and Tatiara districts.

Overall this created a shift in the region’s transaction profile away from the lower end to create a more even spread, contributing to the region’s median price per hectare increase.

Tatiara and Wattle Range both recorded small increases in larger property transactions, which were consistently lower across the region.

The report also partially attributed strong growth in the median price per hectare of parcels larger than 300ha to the fact more of these transactions occurred in the relatively higher priced Naracoorte and Tatiara municipalities.

The 30 to 100ha parcel size segment was the only one to record an increased number of transactions, with the Grant district among the largest increases in volume in this segment, which was the likely the driver of increased transactions priced above $8000/ha.

Reflecting on the findings, Rural Bank west district head of sales James Robinson said increased interstate interest was an element of the stronger demand by farmers seeking to expand and
diversify.

“This trend was particularly evident in the South East region where graziers sought land for greater certainty for feed requirements,” Mr Robinson said.

“Strong commodity prices and a low interest rate environment have been supportive of stronger intentions to expand enterprises.”