Australian farmland prices are expected to continue their modest growth trajectory in 2026, with the median price per hectare forecast to increase by two per cent, according to Rabobank's latest annual Australian Farmland Price Outlook.

The specialist agribusiness bank's RaboResearch division says the moderate growth outlook is driven by a combination of mixed agricultural commodity prices, elevated farm input costs exacerbated by the Iran war, and the prospect of further interest rate increases. This continues a trend of constrained growth seen over the past year, where the median price per hectare of all agricultural land types nationally increased by just 0.4 per cent in 2025.

This is a significant slowdown from the average annual growth rate of approximately 11 per cent over the past decade, signalling a fundamental shift in the market.

RaboResearch commodity analyst Paul Joules said the market has now transitioned into a new phase characterised by more moderate growth that is likely to persist over the coming years. "Our base case forecast expects Australian agricultural land values to continue rising in 2026, with the median price per hectare projected to increase by around two per cent year-on-year," Mr Joules said.

"And the expectation is for similarly moderate growth in land values from 2026 to 2031, with the market having firmly entered a weaker growth cycle, driven by higher interest rates and softer commodity pricing."

The report found that Australian agricultural land values held firm in 2025 despite a complex environment for agricultural commodities. Lower interest rates likely helped underpin market stability, with the official cash rate cut by 75 basis points over the course of 2025.

Farmland price growth in 2025 was driven primarily by grazing land, which recorded a three per cent increase in median price per hectare on the previous year. This contrasted sharply with arable cropping land values, which declined by one per cent over the same period.

"Land purchasing conditions improved year-on year in 2025," Mr Joules said, "supported by three RBA rate cuts over the year. This made land acquisitions more attractive, particularly in the latter part of the year." He said strong returns in the livestock sector help explain why most price appreciation occurred in grazing land, while negative growth in arable land prices partly reflects deteriorating cropping sector margins, which declined year-on-year.

Land price movements varied significantly across the country. South Australia and New South Wales showed the largest increases in the median price per hectare of grazing land at 23 per cent and 22 per cent respectively. However, New South Wales also saw the biggest fall in arable land prices in the nation, with the median price per hectare declining by 11 per cent. South Australia's arable land prices increased the most in the year, with median price per hectare up 13 per cent.

Looking ahead to 2026, conditions for farm budgets are challenging, with farmers under significant pressure from rising input costs and a mixed income outlook across commodity sectors. The report analysed more than 2000 sales from 2025 from a data set comprised of in excess of 16,000 sales across the country since 2019.

Mr Joules said elevated farm input costs amid the Iran war, combined with rising interest rates, are leading to a more subdued outlook on farmland price growth in 2026. "A key challenge, and one likely to remain a recurring theme in 2026, is the supply shock stemming from the Iran war," he said. "The conflict has already driven fertiliser and diesel prices to exceptionally high levels, which are expected to have a material impact on margin potential across the sector."