Property

Property prices to increase for the next five years, says Rabo

Eric Barker, 05/10/2021

RABOBANK is predicting property values to keep increasing for the next five years, forecasting high commodity prices and record-low interest rates to stay for the long-term.

The bold prediction was made in the bank’s annual Agricultural Land Price Outlook, which says the property market will continue to be fuelled by a shortage of available land for purchase and a booming agricultural economy.

Wes Lefroy

Senior analyst and author of the report Wes Lefroy said farm revenues were at record levels with widespread rainfall supporting production.

“Nationally, our research is showing farmer purchasing intentions are at the highest point in at least five years,” Mr Lefroy said. “Nine percent of Australian farmers are reporting they intend to buy land within 12 months.”

The report says lack of supply has been a major part of the property boom in the past two years, with 45 per cent fewer sales recorded in 2020 compared with 2019.

Mr Lefroy said the main drivers behind the record prices were likely to continue for at least the next 24 months.

“We expect interest rates will stay at record lows until at least 2024,” he said.

“For land price growth to reduce, or even for a downward correction to occur, we would need to see a multi-year interruption to a combination of commodity prices, production or interest rates.”

Some sceptical of interest rates

But not everyone in the property game is as optimistic about the long-term sustainability of low interest rates – and the long-term property outlook.

Colliers’ Rawdon Briggs

Colliers’ head of agribusiness Rawdon Briggs said signs were starting to show an increase in interest rates was on the horizon.

“Watching the US Treasury and the talking points it has outlined, I can’t see them continuing to print money at the same rate as they already have,” Mr Briggs said.

“There’s also been some talk by Australian Treasury of trying to temper the housing market.

“All the economic indications show to me a tap of the breaks is coming very soon – just a tap not a slam.”

Mr Briggs said increasing input costs for agribusiness across Australia were also likely to have an impact on purchasing intentions.

“Whether it be labour, steel, fuel, anything you can name is either very hard to acquire or you have to pay a premium for it,” he said.

“While the commodity prices are strong, sentiments can change if cost of production continues to escalate or domestic banking hits the pause button.”

 

 

 

 

 

 

 

 

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Comments

  1. Michael+Vail, 06/10/2021

    Well, well ! 😳 An article like this is surely a bit self-serving, is it not? It’ll surely create more FOMO and increase momentum of bank lending . We are already well past the limit of common-sense and the likelihood of ROIC being greater-than the WACC looking through the cycle.

    When interest-rates rise (and sooner than you may imagine), the first to fall in price will be the stock-market … then bond-prices, and then Real-asset-prices fir land (including agricultural and specifically fir pastoral-zone grazing land).

    Sure, they aren’t making any more of it, but you’ve still gotta be able to stand-alone and be self-funding, AND it’s gotta be an investment. (See the litmus test mentioned above.)

    IMO

    • Jack Clancy, 13/10/2021

      Agricultural land is being valued by hysteria in ownership and stocking prices. Proper valuation is not being applied. I agree with both other commentators however whilst agents seek wealthy alien buyers prepared to pay far more than value to get a foothold for immigration and vendors are not prepared to reduce their return to ensure Australian buyers prices will stay higher than real value…The land will be flogged by the aliens…who already own energy production, more than 42 dairies, at least 41 wineries and an array of productive agricultural land.

  2. Graham Johns, 05/10/2021

    I disagree in every aspect of this article. Firstly the prices are already unsustainable without a further five years of increases. Secondly interest rate rise is not a possibility it is a definite, has anybody been taking notice of the storm that is about to occur in the world wide economy with americas debt level and the chinese investment group which are about to go bankrupt owing $600b this will wipe billions of dollars out of the world wide economy overnight. Lastly the most important aspect is that the agricultural sector is not booming, while commodity prices may be there is still large areas of this country that have not come out of drought since 2017. Obviously companies like rabobank are going to make ridiculous forecasts like this in the hope that it gives a fool with some money confidence.

    • Michael+Vail, 06/10/2021

      Beautifully said, Sir !! You are to be Congratulated!

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