Australian farmland price outlook 2025: Modest land value growth expected following 2024 contraction

Median land prices across Australia declined 6% in 2024, following a prolonged period of growth.

Between 2020 and 2023, median land values grew an astonishing 79%. Thus, the contraction in 2024 is unsurprising. Over the past 12 months, falling commodity prices certainly had an influence, especially given that higher interest rates and fertiliser prices have made recent commodity price declines more unpalatable, and land purchasing power in 2024 suffered because of this.

In 2024, we observed price disparities between different land types, with grazing land prices declining 13% YOY, while arable land remained more stable, shrinking just 2.6% YOY. Except for South Australia and Western Australia, all states recorded year-on-year price declines. A common factor that likely influenced land prices in 2024 was the tightening of on-farm margins amid rising cost pressures, with high interest rates and fertiliser prices being two key drivers. Decreases in grain, dairy, cotton, and sugar prices during the 2024/25 season added to the margin pressure. We anticipate some of these headwinds to ease through 2025, with interest rates expected to fall and RaboResearch's Australian commodity price index projected to rise from current levels. Meanwhile, the Bureau of Meteorology's (BOM) ENSO outlook sees neutral conditions through much of 2025, pointing towards rainfall levels closer to historical averages.

Land prices will likely rebound in 2025, but we expect growth to be modest compared to recent years.

Buyers will be searching for value, and given the recent drop, investment opportunities may present themselves in 2025 as buyers capitalise on weaker land values.

RaboResearch's base case for 2025 predicts a return to modest, single-digit growth following last year's decline. Seasonal conditions will play a key role in determining prices, but early indicators are positive, with winter crop production projected to rise during the 2025/26 season. The recent weakening of the Australian dollar will support Australian farmgate prices and, along with an anticipated easing of the official cash rate and forecast price improvements for beef and dairy markets, is likely to positively impact total farm production value. RaboResearch believes we will enter a new period of steady growth, reflecting the more normalised on-farm margins expected. However, the US-China trade war adds a new layer of uncertainty. Given Australia's ties to both countries, a situation in which Australia is compelled to choose between them would be the worst-case scenario for exports - and this could have an impact on farm margins.