Current supply of assets, conditions, and outlook

October 15, 2018 9:49 am

What do the next two years hold for investors and landholders?

The Australian agricultural land price outlook is predicted to climb higher led by high demand and fewer properties on the market, according to a report by Rabobank, August 2018.

The increase has been driven by a rise in operating profits where most agricultural commodities are trading in a very profitable range.  Beef, wool and sheep meat prices reached decade highs in 2016/2017 along with grain and pulse prices at a current high.  These increased operating profits have enabled farmers to purchase more land.


What does this mean for corporate/institutional investors?

For corporate or institutional investors agricultural land is becoming an asset class that offers attractive risk/reward fundamentals as global economies are starting to slow (excluding the U.S) and recent equity market shocks have created uncertainty.

The last five years has created a lot of interest due to the increase in operating profits and capital growth of land prices for both domestic and international corporate investors.  The high operating return increased the desirability of agricultural investment.

Seeing new investors enter the market as consumer demand for specific foodstuffs offer demand-side opportunities offering strong yields for investors.

Properties sold in 2017 were at a ten-year low due to the overall improved operating profits. Other motivations included graziers leasing out land to benefit from capital growth and those at retirement age are now continuing to farm.


Despite the recent dry conditions, continual growth is predicted across the Australian rural property market. Interest rates have remained low, with strong commodity prices putting individuals in a good place to purchase.  Dry conditions are not new, and producers understand it’s a tough time, but the focus is on long-term goals.

Competition for land in stable rainfall areas will continue to force land prices higher as a way of reducing drought.  The increase in competition is putting a higher level of importance on buyers for better due diligence when considering purchasing agricultural land.

Once the dry conditions ease more land will come on the market. Influences on land prices could include the ongoing trade war giving direct negative implications for profits if it continues to escalate and the tightening monetary policy may contribute to the rise of cost of funds

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