‘FOMO’ drives healthy outlook for value of rural properties

The value of WA farmland is likely to climb for five years as strong rainfall and commodity prices, low interest rates and eager farmers deliver arguably the best macro-economic conditions on record, according to Rabobank. The outlook is so positive that the specialist agriculture bank has itself questioned in its annual Agricultural Land Price Outlook: “Does it get any better than this?” Rabobank senior analyst Wes Lefroy said WA was in some areas outperforming the nation, with 11 per cent of WA farmers intending to buy more land in the next 12 months, compared with a national average of 9 per cent. The national figure was at a five-year high. “Not in the last 30 years have the macro settings been so supportive of agricultural land price growth, with prices of most major agricultural commodities either at, or near, record levels,” he said. Mr Lefroy said WA’s positive outlook was in part driven by its strong, to exceptionally strong, crop harvest in three of the past four years. The State had also had good rainfall and record low interest rates. And it seems even farmers have a “fear of missing out” — in line with a segment of buyers which has driven sales in the residential market — and has put upward pressure on prices. In 2020, the number of agricultural properties on the market in WA contracted 29 per cent. “Across the country the pipeline of sales coming on to the market is historically very low, which presents a distinct lack of buying opportunities,” Mr Lefroy said. “We have observed the ‘fear of missing out’ factor prompting buyers to enter the market earlier than planned.” In some cases, Mr Lefroy said, “FOMO” was prompting buyers to pay much more than the productive value of the land in order to secure the property, not knowing when another opportunity may arise. The impact on this year’s WA sales remains to be seen, with calendar year results not due until 2022. But last year WA’s agricultural land experienced double-digit price growth of 14.1 per cent. Mr Lefroy said WA was experiencing increased interest from east coast investors, who were impressed by the scale of properties, and prices relative to rainfall. Foreign interest grew 4 per cent in WA last year, and is now up 63 per cent since 2016. Mr Lefroy said high prices and the likelihood of another above-average harvest this season would continue to fuel demand. CBRE’s Phil Melville said the market was busier than ever. “I’ve been in the industry for 28 years and I’ve never seen it like this,” he said.