Measuring Australian broadacre farmland price: A stratification approach

Summary

This working paper proposes and applies a stratification method to measure average Australian broadacre farmland prices using administrative land sales transaction data. It is intended for proving the suitability of the stratification method in the context of Australian farmland.

The stratification method re-weights land transaction data such that it is reflective of the value of true farmland population, rather than the parcels of land that happen to be transacted in a given period. This method is an effective way to control for variability in the number of transactions and characteristics of associated farmland – an inherent problem with administrative sales data where the transactions do not necessarily reflect the underlying farmland population.

The results in this paper are presented over the period 1992 to 2018, at a national level and across the three climate zones of Australia. However, the methodology can be readily applied to specific regions to produce more spatially refined estimates or be applied to more recent administrative data to provide accurate and timely estimation of average farmland price.

The use of administrative transaction data provides an opportunity for the accurate and timely measurement of Australian farmland prices. This approach has many advantages such as the large number of data records available at a relatively low cost and with minimal collection burden. There are also challenges, such as controlling for complex transactions involving multiple farms and dealing with fixed improvements. Some challenges have been resolved and others provide opportunities for future refinement — yet, due to the stratification method used, the impact of such changes or refinements are likely to be minor.

Over the 1992 to 2018 period, average price per hectare of Australian broadacre farmland increased from $375 to $2,524, growing at an average annual rate of 7.38%. For the same period, the price increased from $577 to $3,409 per hectare in the high rainfall zone and from $294 to $2,193 in the wheat sheep zone. Although the measured price increased more rapidly (from $67 to $1,292) in the pastoral zone, the underlying growth was comparable to those in other zones.