NOVA SCOTIA
Stephen North, farm appraiser in New Minas, N.S. has observed land values in his area increasing from six to eight per cent per year generally, although this rate has slowed recently. Prices tend to be flat for a period then increase rapidly and then flatten out again, rather than rising in a linear fashion, North says.
North is close to the Halifax market and believes the buy-local phenomenon has helped local farmers. Land in western Kings County and the counties west of Kings County hasn t appreciated at quite the same rates as within the eastern section of Kings, says North. These areas would seem to me a buy, if one follows the belief that good farmland is needed to feed the world.
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North adds orchard prices have been depressed for a number of years because of competition with Chinese markets, and new vineyards are becoming an attraction.
SOUTHWESTERN ONTARIO
Richard Brown of Oakview Appraisals in Ridgetown, Ont. was meeting with some European investors the week that COUNTRY GUIDE caught up with him. These investors are prepared to lease back the farms they buy on five-to 10-year terms to the vendors, as long as this works out to a three to four per cent return. That s an expensive lease rate per acre at today s land prices, unless you can grow higher-income crops, or unless current commodity prices hold for grains and oilseeds.
Since January 2008 land prices in Brown s area have increased dramatically, jumping 40 to over 50 per cent depending on soil. Prices range from under $4,000 per acre to over $13,000, exclusive of building values.
I live in a cash crop area with a limited number of livestock enterprises, but farmland prices have increased significantly in most areas of southern Ontario over this time period, Brown says.
Demand is high from both farmers and investors driven by low interest rates, high commodity prices and limited supply of farms for sale in many areas. Most players in the marketplace feel there is more upside potential, including investors, Brown says. I expect a further notch up this fall and winter, based upon the current outlook.
SOUTHERN MANITOBA
Gordon Daman, Red River Appraisal Services in Man., estimates land prices have appreciated in southeastern and central Manitoba by eight to 10 per cent in the last two years. He says this has been spurred on by legislation, namely the manure management rules that are stopping winter spreading and limiting phosphorus levels in soils that haven t typically grown P-loving corn hybrids.
This is a livestock-dense part of the province, including supply-managed livestock operations which have the cash flow ability and manure needs to acquire land. In comparison, southwestern Manitoba hasn t had the same level of appreciation and it doesn t have nearly the animal density, with fewer supply-managed farms.
Since there s no cap on quota in Manitoba, milk quota is trading at greater than $30,000 per kg. Daman has noticed that the European farmers who have moved to the province tend to overbuild their dairy facilities and are very aggressively expanding.
The vast majority of the land transactions Daman is involved with are local farmers buying from retiring farmers, or retiring farmers using land rent as part of their pension portfolio. Farmers continue to pay a premium for close land up to 30 per cent, says Daman.
Despite bullish prices, little land is actually trading hands across the province compared to past years. If we continue to get greater consolidation, land should become less fluid, more predictable, says Daman.
For non-farm investors, says Daman, it s better to invest in a multi-family unit. His reasoning is for Manitoba and goes like this. You can buy land in the southeast for $1,700 an acre and cash rent is $60 to $70 an acre. By the time you pay the property taxes, you re looking at only a four to five per cent return.
However, he agrees that long-term appreciation does play into the equation, particularly on irrigated or tiled potato land. I expect continued appreciation of potato land, and it s creeping westward. I ve seen farms bought there 10 years ago for $2,000 an acre and sell today for $4,000.
Land is a finite resource, says Daman. It s logical that with increasing world populations and demand for food that land will continue to appreciate. Historically there s not been a lot of depreciation.
BRITISH COLUMBIA
Most farmland in B.C. in the last decade has climbed 30 to 50 per cent with prices determined by location, soil quality and water availability, says Gord Houweling, from B.C. Farm and Ranch Realty Corp.
The Fraser Valley is where the largest increases have occurred, says Houweling. We re now seeing some downward pressure on land values in the last year. However the values remain strong in an overall weaker economy.
Houweling says interest rates and lending policies are driving the rise in values, along with demand from the blueberry market. This sector will pay a premium for high-quality land in the Fraser Valley, which in turn displaces dairy farms to areas of the province with lower land values, which then drives the values up in that area. It s kind of like throwing a stone into the middle of a pond and watching the ripples, says Houweling.
Currently, about 20,000 acres of blueberries are planted in B.C. with expected yields close to 100 million pounds. As more blueberries come into production and markets are fulfilled, Houweling expects some downward pressure on land values in the Fraser Valley. Land values may ease up by five to 10 per cent for a period of time, but long term it should continue upward, he says.
The values may have levelled off for a while because of the global economy, but land and water will continue to grow in value. I have yet to meet someone who overpaid for farmland in the last decade. Land continues to be a great investment, says Houweling.
Will land keep climbing in price? Houweling says the answer lies in just one number: In September we welcomed the seven billionth person into this world.
