The Australian Farmland Values 2022 report showed Victoria scored a 30.4 per cent hike in farmland prices during 2021, the largest the state has recorded in the report's 27-year history.

It was also well above the five-year compound annual growth rate (CAGR) of 14.3 per cent.

Rural Bank senior agricultural analyst and report author Michael Curtis said all of the state's four regions had solid increases, with only one municipality in each returning a decline in prices last year.

The south-west region led the charge, with median prices surging 35.2pc year-on-year.

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Gippsland and the north grew fast too, jumping 28.8 and 25.4pc respectively.

It's a big turnaround from Gippsland's fall of 5pc and the north's meagre 0.9pc in 2020.

The slowest growth in Victoria during 2021 was still a very solid 16.3pc in the north-west.

"While, overwhelmingly, the picture for the country was of favourable seasonal conditions, that bit of western and north-west Victoria and south-east South Australia were relatively dry," Mr Curtis said.

"I think that's reflected in the lower growth of those regions for farmland values in the last year that weren't as positive as some other cropping regions.

"They still were able to achieve some relatively good cropping production in those regions so there's still plenty of optimism there but the lower growth in prices is probably reflective a bit of the seasonal conditions there."

Although a good season might see farmland prices in those regions lift again, Mr Curtis said it was perhaps more complicated.

"Let's see how this year plays out," he said.

"The southeast of SA and northwest Victoria had a pretty good run of growth before 2021, so there could have been a bit of consolidating in the market as well."

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Rural Bank eastern Australia's Andrew Smith said the increases followed favourable seasonal conditions across much of the state, low interest rates and strong buyer cash flows.

"The state saw a rise in the number of Melbourne buyers moving into regional areas and purchasing land, along with an increase in people electing to retire while land prices are so strong, capitalising on the buoyant market," Mr Smith said.

The impact of lifestyle buyers was evident in the number of transactions for properties priced above $20,000/ha, which ballooned from 108 transactions in 2020 to 294 in 2021.

And while the smallest property category of 30-50ha grew by 41.5pc to $14,655/ha, the fastest rises, a massive 67.5pc, were in fact for 150-plus hectare properties, which fetched a median price of $5612/ha in 2021.

The farmland market in Tasmania, meanwhile, tightened. Only 189 farmland properties changed hands in the state during 2021.

Although prices continued to break records, the gains were smaller. While the tiny state grew 25.3pc in 2020, it pushed only 7.6pc higher in 2021 to reach a median price of $14,730/ha.

Notably, the heat shifted south. The northern and north-west regions chalked up 4.8pc and 7.8pc respectively but the south hit 50.9pc.

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It's a result to be treated with some caution given there were so few sales, Mr Curtis said, while Rural Bank Rosny Park's Nik Preece said the market remained strong.

"Of note were two major grazing properties that changed hands in the Southern Midlands," Mr Preece said.

"Demand remains high for irrigated grazing properties and featuring again in 2021 were high-valued orchards and vineyards.

"Good quality farmland remains tightly held with demand outstripping supply."

Nationally, farmland prices grew 20pc in 2021.

The median price per hectare soared to $7087 a hectare in 2021, making it the biggest national price rise in dollar terms ever recorded in the 27-year history of Rural Bank's Australian Farmland Values report.

WA led the pack at 36.3pc, Queensland came in second at 31.3pc and Victoria wasn't far behind at 30.4pc.

Markets were far less bullish in NSW at 8.3pc and Tasmania, 7.6pc. The NT was the only place where land prices fell, down 18pc.

Rural Bank general manager sales partnerships and marketing Simon Dundon said growth in farmland values exceeded residential prices in capital cities, which had a lower compound annual growth rate of 5.4pc over the past 18 years.

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