South Australian farmland values 2015 report

Figure 1: Farmland performance measured as growth in farmland prices for the different regions in South Australia..

About the research

Farmland prices are a function of many variables including, but not limited to rainfall, location, agricultural industry, productivity, land quality, sentiment, interest rates, commodity prices and the performance of the wider economy. To isolate the reason for a particular movement in the median price for a region is complex. Therefore, the focus of the report is to describe regional and state trends more so than the drivers behind the observed trends.

The report is a guide to the market value trends of commercial farming property and is not intended for use as a valuation tool. A qualified professional is required to assess the value of a property.

This analysis tracks the median price of commercial farmland in dollars per hectare by eliminating, where possible, metropolitan and small block sales, as well as sales where one party has compulsory powers. Further, small farms are excluded to limit the impact of ‘lifestyle farming’ on the results.

As property settlement periods vary, some 2015 sales will not be captured in this report at the time of publication. The median price for the most recent year is a preliminary one and will be revised at least annually.

The prices used in the report are based on the total sale price and therefore include the value of capital improvements. Growth in values may reflect an element of capital improvement on properties. Similarly, if water entitlements are attached to a land title and sold with the property the value of the water will be included in the sale price. If water entitlements are sold separately from the land, this value will not be captured in the sale price.

*The report uses medians to provide a measure of the mid-point of farmland prices as a guide to market activity. Compared with an average, the median is not as readily distorted by unusually high or low prices. Even so, in areas where there have been very few sales, the results should be viewed with caution as the year-on-year change in median price may not be indicative of an actual change in farmland value. A higher proportion of lower-priced sales can result in a lower median and vice-versa.

**Farmland sales volume is reported as the estimated number of transactions. Farms are sold as single or multiple lots, which obscures the view of the number of farms sold, particularly in cases where one farm is sold as multiple lots to multiple buyers. Accordingly, the ‘number of transactions’ should not be interpreted as the number of farms sold and should only be used as a guide to market activity.

State performance

• Values grew steadily between 1995 and 2002, with average annual growth of 4.5 per cent.
• Rapid annual growth of 13.7 per cent occurred between 2003 and 2008.
• Since 2008 the median price has been stagnant with annual growth of 0.2 per cent.

Figure 2: Median farmland price ($/ha) growth for SA farmland from 1995 to 2015.

Figure 3: Annual median farmland price growth (%) for SA farmland from 1995 to 2015.

The number of farmland transactions increased by 5.1 per cent in 2015. The number of transactions has increased in the last two years from a low of 555 in 2013 to 678 in 2015 (Figure 4).

A rise in the number of transactions drove an increase in the total area of farmland traded, up to 210,000 hectares. This is the largest area traded since 2003 and represents approximately 1.7 per cent of improved farmland in South Australia.

The total value of farmland traded in South Australia reached a new high of $414 million in 2015.

Figure 4: Estimated number of farmland transactions for SA farmland from 1995 to 2015.

Improvement in median values was strongest on the Eyre Peninsula (+24.4%), followed by the Adelaide region and Fleurieu Peninsula (+8.5%). Median values on the Yorke Peninsula, in the Mid North and the South East declined in 2015 (Figure 5, Table 1). Nevertheless, the long-term trend across the state has been one of growth.

Farmland values are based on all farmland (including improvements), not just arable land. Due to the structure of land ownership and a lack of data, the arid areas of South Australia are not covered in this report.

Figure 5: Farmland performance values for regions within South Australia.

Table 1: Farmland sales by municipality – South Australia.

^aUse price information with a small volume of transactions with caution. The median price for municipalities with less than fiver sales in 2015 is not reported. ^bRefer ‘About the research’ section.

Conclusion

With the value of farmland linked to its productive capacity, it is no surprise that farmland values have been increasing over the same time period where significant gains have been made in yields. New cropping techniques and machinery have led to increased yields in the cropping districts, particularly the Mid North, Yorke Peninsula and Lower Eyre Peninsula. Bluegum investment schemes in the South East during the early 2000s saw prices spike and people less willing to sell land below prices received at that time. Values have been stagnant in the past few years and farmers have been reducing debt at the same time.

Contact details

Will Rayner
https://www.ruralbank.com.au/