Price growth for Australian farmland continues to outpace the residential property market and the stock market, according to Rural Bank's latest analysis.
In 2022, the national median price per hectare for farmland hit $8,506, a 20 per cent annual rise.
Across the same period the average price for residential property dropped 5.3 per cent, while the ASX200 finished 2022 5.5 per cent lower.
For the first time in nearly 30 years, Rural Bank's annual analysis of farmland transactions has shown every state and territory market posted more than 15 per cent growth.
"Farmland performed really well, and has been for some time," Rural Bank's head of agribusiness development, Andrew Smith, said.
"If you look at the compound annual growth rate over the last 20 years, it is running at 8.5 per cent."
In recent years, rural agents and lenders have attributed the skyrocketing price of farmland to a combination of low interest rates and high commodity prices.
Those conditions, in addition to favourable weather and strong production of grain, beef, dairy and sheepmeat, prevailed throughout 2022, further bolstering buyers' appetite for farmland.
However, the profitable season for Australian agriculture was also one reason the number of properties hitting that market dropped off sharply.
"A lot of the farmland around Australia is very tightly held," Mr Smith said.
"With conditions being so good, a lot of farmers decided to continue to farm rather than exit the industry, so we did see a reduction in the number of properties offered for sale."
Another reason prices continue to surge is the premium some farmers are willing to pay for properties that are close to their existing operations.
"A structural adjustment we've seen in recent years [is] where neighbours buying neighbours are often willing to pay a premium for country that's next door and that's playing out in the numbers this year," Mr Smith said.
"Predominantly most of the demand has come from larger family agribusinesses."
Challenges ahead
This year has already seen a 30 per cent drop-off from the 2022 record observed on the Eastern Young Cattle market.
Grain and oilseed prices have also come off the highs they were driven to by the war in Ukraine and COVID-induced supply chain issues.
Although most commodity prices remain above their five-year average, Mr Smith expects a cooling in the demand for farmland over the coming year.
"I think we'll see an inflection point, I think when there's been 20 per cent growth for a number of years that you find a new level," Mr Smith said.
"So we think we'll continue to see growth in 2023, which would make it 10 years of continuous farmland value growth, but not at the same level."
