Good Farms ‘Being Snapped Up Like Crazy’

Taylor Scott International News

By Debora Van Brenk , The London Free Press Wednesday, September 11, 2013 Soybeans grow in Leamington, Ontario on Wednesday, September 11, 2013. (DEREK RUTTAN, QMI Agency) A three-year frenzy for farmland is starting to cool — but only slightly — as grain prices continue sliding from last year’s lofty heights. Even so, don’t expect land prices to drop anytime soon, says a new national real estate report. It shows acreage has been a particularly hot seller in Southwestern Ontario, where it’s not unusual to find acreage selling at twice the price of a few years ago. “Farming has been on an enormous high,” said David Brown, executive vice-president of Re/Max that produced the farm market trends report. About 40% of acreage on the market saw multiple purchase offers and there continue to be a lot more interested buyers than sellers, he said. “The very desirable farms are being snapped up like crazy.” The biggest jump came last year, coinciding with corn prices that topped $7 a bushel and soybeans at $13-plus. But this year’s dip in crop prices is making some buyers more cautious. “That may moderate the market,” Brown predicted. He said that means prices will stabilize but are unlikely to fall. “It’s hard to forecast anything but positive,” he said, as long-term trends show there’s still far more demand for land than available acreage. The biggest price jumps in Ontario during the past three years took place in parts of Middlesex and Elgin counties. “Clearly the lustre came off in February” as crop prices started dropping, said Mark Wales, head of the Ontario Federation of Agriculture. But, apart from a decline in the 1980s when interest rates rose to 20%, land prices haven’t fallen in recent memory. Increases may slow, and sometimes even plateau, but the supply of land keeps shrinking and the world population is growing. “The long-term trend has always been upward,” Wales said. But the ups and down of commodity prices also mean anyone who has bought that rapidly appreciating land will also need some fiscal depth to make payments. “Hopefully for them, they have enough cash flow to back it up,” Wales said. The increase in purchase prices is also driving up rates to rent the land, he said. Brown said most buyers are neighbours of the sellers — far more often family farmers looking for economies of scale than speculators looking for a future flip. “They’re looking long term. They’re not interested in short-term fluctuations.” The rapid rise in prices also makes it tough to be a new buyer. “It’s good if you own it because it means you’re worth more, at least on paper,” Wales said. “The problem that such a massive short-term increase brings is that it makes it tough for young farmers.” Fifteen of the 17 rural communities highlighted in the RE/MAX farm report showed land-price increases in farmer-to-farmer sales — the Annapolis Valley in Nova Scotia and the Fraser Valley in British Columbia were the two exceptions where prices changed only slightly or not at all. — — — A sampling of farmland prices per acre (market value in 2010 in brackets) Leamington $11,000+ ($7,000) Chatham-Kent $5,000-$16,000 ($4,000 – $12,000) Middlesex East $12,000 ($8,000) Middlesex West $12,000 ($5,000) Elgin County East $10,000 ($6,000) Elgin County West $8,000 ($4,500) Lambton North $11,000 ($6,000) Lambton South $7,500 ($4,000) Woodstock/Stratford $15,000 – $18,000 ($8,400 – $8,600) Kitchener-Waterloo $15,000-$18,000 ($9,000 – $9,500) Bruce County $5,000 – $9,000 ($3,000 – $5,000) Grey County $3,500 – $6,500 ($2,500 – $3,000) Northern Saskatchewan n $1,500 – $2,000 ($650 – $1,200 in 2011) Central Alberta $3,400 – $6,500 ($1,600 – $3,800 in 2011) Fraser Valley $40,000 – $60,000 $40,000 – $60,000 in 2011) Source: RE/MAX Market Trends Report: Farm Edition 2013 Taylor Scott International

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