Rabobank land price outlook

Webinar held on Wednesday 27th October 2021

67 participants including a number of PrincipleFocus clients and team members

Toby Mendal and Wes LefoyKey

Key Learnings

  • Interest rates are still a the single greatest influence on land values with a correlation of 40%. Yet their influence is falling in the current market with increased commodity prices and productivity gains having greater influence over time.
  • These 3 drivers, interest rates, commodity prices and production are all very supportive of growing land values.
  • Result is increased demand with 9% of farmers, the highest since the Rabobank survey commenced in 2016, now indicating a interest in purchasing property in the next 12 months
  • These factors are driving Rabobank productions of a further 10% increase in land values in 2022 and an 8% increase in 2023. The increase in land values is expected to soften in 2024 to 2025 with minimal increase in those years.
  • One interesting matter arising from a participant question was the premium payable for the neighbours land. Previously @ PrincipleFocus we have had a view that this value is 10 to 20 per cent. However there was a suggestion, based on antidotal evidence, that this premium has increased to as much as 30 to 40 percent.
  • The capital growth in land values coupled with income returns has placed farm land as the 2nd best performing asset class over the past 10 years, with substantially lower volatility than other asset classes. Importantly, farm land does not move in the same manner as other property classes, such as residential and commercial property.
  • The data presented by Wes was impressive, analysing land prices per ha per mm rainfall for different regions. He highlighted the substantially increased data available to farmers making strategic decisions re land acquisition and production, with Digital Agricultural Services able to produce a range of information including historical kg/ha/day feed growth.

Thank you to Rabobank, Toby and Wes for an excellent presentation. Their insight was important, demonstrating the extraordinary skill level within the bank, and identifying opportunity for farmers and investors

The information presented can also be found in Rabobank 2021 Agricultural Land Price Outlook and their Podcast – “How long can the Ag land price boom last?” – great if you are harvesting this month.