The 2017 Australian Farmland Values report has been released and has shown a positive increase for parts of South Australia.
Overall, the state had a median farm price growth of 17.1 per cent, but the largest growth was seen in the Mid North with the 2017 median price rising 37.8 per cent to $4,706 per hectare.
In 2016, the majority of farm sales were occurring between $1,000 and $4,000 per hectare whereas in 2017, the bulk of the sales were occurring in the $4,000 plus category.
Matthew Ough, the senior analyst for Ag Answers, Rural Bank says the rise in percentage is linked to the volume of transactions which reflects positively on the comings and goings within the region.
“What it means is that the land that is selling in that region is the higher valued land”, Matthew explained.
“The land that is perceived as the most productive, having the most improvements or being located in a desirable position in that region. That could mean a couple of things for who is buying it, it would mean that what was coming on the market in 2017 is actually the better properties in the region.”
In the Yorke and North in 2016, there was a total of 168 transactions and in 2017, there were 230.
Mr Ough says the farming season in a region can have an impact on price, but it is not recommended to use this as a comparison. Yet he explains that periods of consolidation where farmers are reducing debt can have an impact.
“What we do is look at the proceeding five years within that region and you will note that it had been fairly reasonable in that time, what that can suggest is that there was a period of consolidation during that time, where farmers were reducing debt”, he said.
“One explanation is that they have found themselves in a better financial situation come 2017 and were able to compete for these properties. The calendar year for which the data is produced is not always the seasonal conditions that you should use to explain the result.”
With 2018 shaping up to be a rough year for many of our farmers, Mr Ough says a decrease in transaction volume could occur.
“With 2018, it is obviously very dry and quite a difficult season in the way it has been shaping and what you may see is a decrease in transaction volume just because people are not prepared to buy or to buy to the same level that they were buying in 2017, equally people are not willing to sell to the same level that they were in 2017.”
When reviewing the statistics of 2017, the rise came as a surprise to analysts which led to a further investigation.
“When you get the bulk of the sales coming over $4,000 per hectare in one year, compared to the previous year which was between $1,000 and $4,000. It is not uncommon to have a fluctuation of that amount but explainable by what actually sold in 2017”, he said.
For more information on the report, visit the Rural Bank’s website.