Extracted from the Farm Tender weekly Newsletter - Sign up and get the email every Wednesday morning before 6 am. www.farmtender.com.au
By Dwain Duxson.
We covered the topic of "Land prices" twelve or so months ago, but I thought it might be a good topic to revisit as things have changed again.
We can all relate to Land in our own district, so I will centre this piece around an area where I came from, Marnoo. It's in the Wimmera area of Western Victoria.
Last Friday, a couple of blocks on Land in the area made $7700 (566 acres) and $8000 (466 acres) an acre.
For the record, the 7700 block was widely considered the more productive of the two sold. A mate of mine (a Melbourne-based businessman) bought the $8000 block to connect the Family Farm from one end to the other. They wanted it and were prepared to go above the considered value to acquire it, and that's part of the reason why prices are going up.
One Farmer who holds a substantial holding in the district said, "we should be sellers, not buyers at those rates".
Just as a comparison, a 2700 acre property in the district made $2325 back in December 2019, that's less than two years ago. Yes, it was a larger offering, and some of the country was suited more to Grazing than Cropping, but it highlights how things have changed in a very short period of time.
Last week Upper Murray Farming Land on the NSW/Vic Border made $17,100 an acre, and near Lake Bolac in Victoria's South, a Farming block made $13,500 and acres.
Accumulation is the key, and it's why Farmers locally are snapping up these smaller blocks as they come on the market. They have accumulated Land over the years, built up equity and are in a position to buy that block next door at a premium. Hence the price keeps going up.
Bit of FOMO in that as well. They don't want to look back and say shoulda, woulda, coulda....
It's a different story closer to the capital and Rural cities where the "lifestylers" are driving the market upwards. People want a taste of Rural life, albeit it on a smaller scale and where the primary source of income isn't derived from that property.
The scenario has changed, so we now have to look at broadacre Land ownership a little differently. We can no longer lease the country out at the obligatory 5 percent, as that figure is beyond what you can make of the Land from a production sense.
So we have to separate the production side from the Land side of the business. No longer can we make enough income of the Land to pay for it quickly. We have to now view Land ownership as a wealth-creating asset that's not linked to the production side. The value add comes from the capital gain.
And Land is still cheap in Australia compared to other established countries.
How are young people with no assets behind them going to become Agricultural Land owners?
They will find a way. They are going to have to innovate as others have in the past, start out small and accumulate as many have before them.
How many shearers or former shearers are now Farmers in their own right? Lot's, and many of these guys came from rural backgrounds that had none or little Land.
With confidence at an all-time high in Agriculture, we will see more land prices rise over the next 12 months.
What will stop it? Who knows, maybe it will just keep rolling along.
End of message.