The pace of capital growth in Australian farmland is expected to moderate over the coming years, as farmers consolidate recent acquisitions and shift their focus to maximising returns amid rising input costs.

In its latest farmland price outlook, rural lender Rabobank reports that only three percent of farmers surveyed in early 2025 intend to purchase land in the next 12 months—down from six percent the year prior. The decline reflects both affordability constraints and a more selective, value-driven approach to land acquisition.

After soaring 79% between 2020 and 2023, median farmland values declined six percent nationally in 2024—the first contraction in four years. Grazing land saw the sharpest fall, down 13 percent, while arable land proved more resilient.

Elevated fertiliser costs and tightening on-farm margins have increased income volatility. Finance costs also remain a significant barrier to expansion. While the Reserve Bank of Australia began easing monetary policy in early 2025—cutting the cash rate twice by 25 basis points from 4.35 percent to 3.85 percent —Rabobank forecasts the rate to settle at 3.60 percent by year-end, still above levels that previously fuelled land price growth.

Bank Bill Swap Rates (BBSW) have retreated in line with the cash rate, improving commercial borrowing conditions. Meanwhile, Australian 10-year government bond yields have oscillated in a narrow range and currently sit close to where they were a year ago, offering less relief for borrowers relying on longer-dated funding structures.

Despite the cooling market, the outlook is cautiously optimistic. Improving beef and dairy prices, favourable seasonal forecasts, and a weaker Australian dollar are expected to support farm incomes through 2025. Rabobank anticipates modest, single-digit growth in land values to resume as confidence gradually rebuilds.

With sentiment shifting from aggressive expansion to operational performance, farmland investment is entering a new phase—less speculative, more strategic.