Rural land prices are booming, but it’s all about land.
So we know that property prices are booming right now. House prices are growing at 20% a year.
Of course, the thing to remember that property is actually a bundle of two distinct assets – the land and the dwelling.
Typically, the dwelling depreciates in value, and the land appreciates (they’re just not making any more of it.)
And so when you hear that house prices are booming at 20%p.a, you know that that action is almost entirely in the land market.
And we got a clear sense of that last week when we saw that rural land prices are growing at a record pace.
Strong commodity markets, low stock levels and sustained low interest rates are combining to create the strongest underlying conditions in 30 years and will push prices of agricultural land higher over the next five years, Rabobank’s latest Agricultural Land Price Outlook report shows.
… The predictions are the result of a surprisingly strong rebound in Australian agriculture from years of drought in the eastern states that has agricultural forecaster ABARES expecting farm production to jump 8 per cent in the current financial year to $73 billion from last year, putting it 17 per cent over the five-year average.
“We’ve had a phenomenal year,” report author, Rabobank senior analyst Wes Lefroy, told The Australian Financial Review.
The interesting thing about the rural land boom is that it’s happening in a synchronised way across the country and across different growing regions.
Australia is a big and diverse place. It’s very common to one region to be in famine while another is in feast.
But right now, everybody’s making hay.
“Most states have been reasonably aligned in terms of having a reasonably positive year as well.”
Australia’s disparate agricultural regions are subject to their own – often varying – conditions, and it was unusual to have all of them booming at the same time.
It was clear they all were, however, as optimism levels – seen in farmers’ intentions to acquire land – were uniformly high, Mr Lefroy said.
Tasmania’s agricultural land prices surged 28.3 per cent between 2019 and 2020, in Victoria by 15.8 per cent, Queensland by 15 per cent and WA by 14.1 per cent.
Tight supply is one factor underpinning prices. The number of sales last year was almost half (down by 45 per cent) from 2019.
Tight supply, strong demand, booming prices… Where have we heard all that before.
Yep. Residential.
And why
Because fundamentally these markets – which is effectively just one land market – is being driven by the same thing.
Record low interest rates.
Rates tumbled in 2020 and they’re not coming back any time soon.
And that’s why it’s a nothing but a boom, from coast to coast.
JG.
Liz says
Hi do you have any ideas/suggestions what we css as n do with our farm land which is not subdivisible? Any agricultural activities as we can only build l residence on it? We are also not in any position to borr.ow.