No decline has been observed in farm property values over the past five years.
Sakhumzi May, the chief agricultural economist at the Land and Agricultural Development Bank of South Africa (Land Bank), told Independent Media Property that since the onset of the Covid-19 pandemic, transactions have generally shown a stable to moderately increasing trend.
“Notably, many of these transactions were facilitated by blended finance initiatives, which provide equity contributions to improve affordability for development-focused clients,” May said.
He said that farmland has typically demonstrated an annual value growth rate of 5% to 8%, depending on factors such as location and level of development, with some regions experiencing slightly lower growth.
“In our assessment, this upward trend is likely to persist in the short to medium term, driven by the growing emphasis on food security.”
Land Bank said farm properties are considered long-term assets with relatively stable values, unlike the more volatile nature of commodities.
The specialist agricultural development finance institution that provides financial services and products to the commercial farming sector said farm property pricing is influenced by typical market, climate, and economic factors, which have consistently been part of the valuation landscape.
However, it said the recent implementation of the Expropriation Act permitting expropriation without compensation has introduced uncertainty. “Historically, the farmland market tends to react more slowly to such developments, and the full impact on land values is expected to become clearer over time.”
May also said that the ongoing uncertainty surrounding the African Growth and Opportunity Act (AGOA) poses a significant risk to South Africa's agricultural export sector. He said a notable example is the citrus industry, which is currently in its export season in the Western Cape and Northern regions.
“Recent developments, including the announcement of a reciprocal tariff followed by a 90-day suspension, have created instability in access to the US market. Should alternative markets not be secured, there could be direct implications for land use patterns.”
The Land Bank said South African farm properties face multiple structural challenges, including increasing competition from imports and rising production costs, particularly energy expenses.
It said the broader impact of the current tariff dispute on production costs remains to be fully understood, as many agricultural sectors are interconnected.
"Additionally, persistently high interest rates are affecting affordability across the industry. The cost of financing inputs has increased, which in turn is placing pressure on profitability. Export-linked commodities are further impacted by currency volatility; the Rand’s recent drop to a historic low of R25 to the British Pound is a case in point.”
May said these combined factors are likely to influence farmland values.
He said that in agriculture, producers often shift to alternative crops when the profitability of a specific commodity declines.
“For instance, citrus may be replaced by other crops, although the value per hectare of these alternatives may differ. Whether such changes in land use and valuation will occur remains to be seen, and will depend on how these market forces evolve.”
To deal with agricultural property challenges, the Land Bank said the challenges facing agrarian property could be mitigated through targeted, government-backed grant programs to reduce input costs for specific commodities.
It said such initiatives would not only support current producers but could also facilitate the revitalisation of underutilised or unproductive farmland.
May said a structured approach potentially led by an institution such as the Land Bank could see these properties brought back into production.
"This could be achieved through managed rental agreements, alongside access to input and development finance aligned with sound credit norms and professional management practices," he said.
According to the Land Bank, the Blended Finance Scheme has proven to be an effective financial instrument in stimulating the market for agricultural land acquisitions. It said this aligns with the bank's mandate to enhance access to agricultural land for development-focused farmers.
“However, to sustainably support this objective, the Land Bank must secure affordable, low-cost funding from both public and private sector investors. This is essential to ensure that agricultural property remains accessible and that ownership opportunities continue to expand within the sector,” May said.
Agricultural holdings were the least sought-after properties in FNB Home and Structured Lending's books in 2024, according to product head Mfundo Mabaso. Less than 1% of properties purchased last year were agricultural holdings.
Independent Media Property