Foreword

Agricultural land continues to be a highly sort after investment from incumbents and new entrants alike. Elders Rural Property Update shows continued strong growth with low sales volumes.

During the second quarter of 2022 there has been some convergence of commodity prices and property values which is to be expected over the longer term due to the close correlation of these indexes. The commodity price index has fallen this quarter and property prices have continued to grow. This is perhaps the most important lead indicator of rural property values.

If commodity prices soften further this may result in slower property price increases. In recent months we saw interest rates continue to rise but there have been early signs of a slow-down in inflation around the world. However, the probability of a recession in some of the largest economies in the world is increasing. As a large exporting nation, recession may lead to deduced demand for some of our agricultural products softening commodity prices further.

However, if fears of recession increase, investors will look for assets that will maintain their value – defensive assets. Agricultural land produces food and fibre that people need even in difficult economic times, which will continue to support land values. During turbulent economic times, landowners have fewer choices to invest the proceeds of land sales. This reduces the incentive to sell land, particularly if seasonal conditions remain favourable. The Rural Property Update shows a strong relationship between supply and demand across all areas. Continued low supply will lead to support for land values.

The Elders Rural Property Update provides valuable property information and insights every quarter, building an invaluable database of information on land values and their relationship with other aspects of the economy and the agricultural sector.

As always, our experienced team in the field, in every major agricultural region in Australia, can provide the local context for the Elders Rural Property Update and its implications for your rural land investments.

Mark Barber

General Manager Farmland Agency and Agribusiness Investments