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Agricultural property as an investment

By Greg Bell

As investors, you probably know how important it is to diversify your portfolio. This phrase has been repeated over and over again, but it really is an important piece of advice, especially when it comes to real estate investments. While you may already have some urban property, you should consider adding agricultural land to your prospective buy list as well.

Here are some of the top reasons to invest in Australian agricultural property in 2022 and 2023.

Historical highs

There was an intense drought in the 2000s that made investors wary of farmland as an additional source of revenue. However, the category has seen an uptick in interest from both foreign and domestic investors.

According to Rural Bank, the agricultural property value in Australia has increased by 12.9% in 2020 and 18.4% in 2021. This asset held strong as a worthwhile investment for the past three years — even when other investments changed in value.

Current value

There are several factors that have propelled agricultural land into a high-quality asset class. that has a positive rate of liquidity for those interested in an exit strategy. The convergence of low-interest rates and normal seasonal weather has created the perfect opportunity to invest in some rural properties. Another important factor to consider is the heavily increasing price of commodities in general. This profitability is encouraging growth in this property sector.

According to the Department of Agriculture's Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), agricultural production is projected to reach $80.4 billion in 2022. This includes both livestock and crop commodities.

The median price of agricultural land sat at $5,061 a hectare in 2018. Since then, CoreLogic has found that the median price rose to $7,060 at the end of 2021. Here is a breakdown of the increase in value as it applies to regional standards, according to the report by Rural Bank:

  • Western Australia: 41%
  • Queensland: 28.9%
  • Victoria: 28.4%
  • New South Wales: 15.5%

Projections

As we look into the future, the projections are positive. Both prices and appreciation of the property have held stable in the market. Australia is set to be a major player in the agricultural sector due to disruptions in Europe. Rural Bank spokesperson James Frost told Commercial Real Estate that the price growth they are seeing in farmland values has only increased.

He said, "It's sometimes even exceeded the price growth we've seen in residential metropolitan markets in Sydney and Melbourne, which is quite astonishing."

When compared to other assets, the agricultural property can be a safe investment when managed well. To learn more about potential real estate property investment opportunities, reach out to Ray White Surfer's paradise.

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