Canadian Farmland Values Reach Record Levels in 2013

The country mouse is doing just fine.

In a report released from RE/MAX, Alberta, along with Saskatchewan, saw the biggest increases in farmland values in the country. According to the report, the high end of farmland values in Alberta increased from $6,500 an acre in 2012 to $8,500 an acre this year.

“Whether it’s owning, renting, investing, or securing farmland for residential purposes, it’s clear the market for Canadian farmland remains strong from many angles,” said Gurinder Sandhu, executive vice president and regional director, RE/MAX Ontario-Atlantic Canada.

The RE/MAX Market Trends Report, which highlighted 17 rural communities throughout the country, found limited inventory levels continued to contribute to pressure on the price per acre in 88 per cent of the markets examined.

“The primary drivers in the market continue to be end-users—established farm operators expanding existing operations,” said Elton Ash, regional executive vice president, RE/MAX of Western Canada. “Be it cashcropper or livestock farmer—the economies of scale continue to support expansion. There are many buyers waitingin the wings, but momentum is hampered to some extent by a shortage of farmland listings. Investors—both institutional and individual— are still active in Canadian agricultural centres, but their presence has subsided in recent months.”

The report also found private and exclusive transactions still account for as much as 50 per cent of farm sales, with deals among neighbours commonplace.

“Some multiple offers have been reported, but most properties are moving at or close to fair market value. While demand remains exceptionally strong, there is some evidence that cooler heads are now prevailing,” stated the report. “There has been an increasing number of properties that did not move at tender or auction, only to sell for good prices on the open market—indicative that buyers are exercising greater caution and diligence. The lack of success at tender/auction may also provide a much needed, albeit modest, boost to farmland listings going forward.”

Competition amongst farmers was cited in the report as an obstacle for younger start-ups and smaller operators, resulting in fewer but larger farms across the country. As a result, the rental market for farmland, along with rates, has experienced strong growth as well, with quality farmland commanding higher prices per acre per growing season.

Another growing trend listed in the report was the growing use of residential farmland. While many of these buyers never intend to farm an acre, intent on recreational use, others are simply taking advantage of price point, proximity to town, favourable tax rates and income potential.

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