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The West is clamping down on foreign ownership of farmland, and even in Ontario, where there are few controls, overseas purchases are much lower than the rumour mill says

Almost every rural coffee shop has its own version of the same story. Foreigners are buying up Canadian farmland and they’re making land prices soar beyond the reach of local farmers as a result.

But is it true?

Maybe. But not likely. In fact, according to the people with their fingers on the pulse, such stories are usually idle rumours at best. Typically, they’re flat out wrong.

But that doesn’t mean there isn’t something that needs explaining at the bottom of it all, with many farmers suspicious about the rapid rise in the price of land.

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The numbers are dramatic. Farmland and buildings in Canada doubled in value between 2004 and 2014, according to Statistics Canada. Ontario led the way by a wide margin, reaching $9,243 per acre as of July 1, 2014, but the increases in the West were healthy too, with Alberta rising to $2,092 per acre, followed by Manitoba at $1,583 and Saskatchewan at $1,043.

Farm Credit Canada has pegged the average increase of Canadian farmland at 14.3 per cent in 2014, followed by 22.1 per cent in 2013 and 19.5 per cent in 2012.

But FCC’s chief ag economist, J.P. Gervais, says there’s a simple reason for the price gains, and it has little if anything to do with mysterious overseas buyers. Instead, record farm revenues, coupled with record low interest rates, have had the greatest impact on farmland values.

Heading through 2016, Gervais believes Canadian farmland prices will be stable, mainly because he also forecasts stable crop receipts over the next couple of years and steady domestic interest rates.

“The big increases seen over the last few years are behind us, but we will be able to sustain current levels,” Gervais says.

Gervais adds the vast majority of farmland transactions are between farmers. “I’m not denying there’s an interest from an investors’ standpoint, whether domestic or foreign, but in terms of the impact on the marketplace, it’s anecdotal at best,” he says.

Getting heavy with penalties

Despite the reassurances from Gervais, however, and even though foreign buying is heavily restricted, there’s a sense that “everyone knows” that foreigners purchase farmland — possibly through Canadian citizens acting as fronts — and sometimes in large tracts.

In Alberta, non-residents, foreign residents and foreign-controlled corporations can only own the stipulated maximum of two parcels of land with an aggregate area of 20 acres. In Saskatchewan, the amount is a mere 10 acres, and in Manitoba, it’s 40.

No restrictions exist on foreign ownership in Ontario.

But, says the National Farmers Union’s Cathy Holtslander, “To find out the acres owned by foreign purchases would require a detailed investigation of land titles and the titleholders of each parcel. In provinces that permit foreign ownership, there is no monitoring.”

Holtslander points out Sask­atch­ewan has further restricted ownership after passing farmland ownership amendments. The province’s Farm Land Security Board general manager Mark Folk says the board has always reviewed each farmland transaction to ensure it complies with the legislation.

But with recent amendments to the Saskatchewan Farm Security Act, the board gets additional powers and tools to assist with enforcement.

All financing of farmland purchases must be through a financial institution registered to do business in Canada, or a Canadian resident, says Folk.

Also, the new amendments place the onus on the purchaser to prove compliance with the legislation. If they can’t prove they are in compliance, they won’t be able to buy farmland, or will be asked to divest their farmland holdings.

“Fines are also increasing for being in contravention of the legislation from $10,000 to $50,000 for individuals, and from $100,000 to $500,000 for corporations,” says Folk.

The board can also impose administrative penalties of up to $10,000 if, for example, a purchaser doesn’t provide required information in a timely manner.

That story about China

China-origin buying is always near or at the top of the foreign-buying rumour mill. But Tim Hammond, president and CEO of Hammond Realty, believes everyone who has purchased farmland in Saskatchewan over the past few years is a Canadian citizen, Canadian resident, or has an exemption to do so.

“The local coffee shops love to talk about ‘foreigners’ buying Sask­atchewan farmland, but most of it is non-verified chatter,” says Hammond, whose Biggar, Sask., firm specializes in the province’s farm and ranch real estate. “The vast majority of farmland transactions are neighbour to neighbour and farmer to farmer”

Farmland values are primarily driven by farm receipts and net farm income, Hammond says.

“The public perception is that ‘foreigners’ or ‘investors’ are driving farmland values out of reach for farmers. There might be isolated incidents of this, but the vast majority of market movements have been driven by producers,” says Hammond.

Manitoba too has seen farms snapped up by producers, often before they even hit the market.

Realtor Sheldon Froese of Canadian Farm Realty in Steinbach, Man., recalls when most of his business came from European buyers. Before the 2007 to 2009 financial crisis, about 80 per cent of his business came from producers immigrating to the province to farm.

But that changed following the worldwide economic collapse, and then the barrier got even higher when land values raced upward.

“We used to spend about five weeks a year overseas doing seminars, and I think the last time we did that was about five years ago. It just isn’t worth it anymore. That has completely dried up,” says Froese, guessing European buying may not even represent as much as five per cent of his business.

Froese finds that if Manitoba land isn’t going from one local farmer to another, it’s to producers from other provinces like Ontario, B.C., Alberta and even Quebec, where land prices are higher.

“Manitoba and Saskatchewan are still the most affordable places to go for good quality land,” Froese says. “(Buying’s) mainly within country right now.”

Investors look elsewhere

Interest from non-ag investment funds is off too.

“About four or five years ago that was a big thing; there were lots of investment funds buying land and renting it out, but that’s slowed down,” says Froese. “Right now we are in a market where it’s basically farmers buying land to farm.”

In Alberta, the province encourages joint ventures between non-Canadian enterprises and Alberta companies, and Service Alberta’s Foreign Ownership of Land Administration (FOLA) does work to keep on top of who’s doing what.

Whenever Alberta farmland is acquired by a Canadian citizen or a Canadian-controlled corporation, the purchaser is required to provide a statutory declaration that includes a sworn oath confirming they aren’t holding the land as a trustee or on behalf of anyone else.

Even in Ontario, it’s no Wild West. “We are still selling land to foreign buyers, but I think there’s a lot less than what the general public has been led to believe,” says Phil Spoelstra of Remax Farm Ontario Team. “I have sold two farms to Chinese buyers and they were both Chinese Canadians and they live on the farms and rent them out.”

European buying spiked in the 1970s, but has dwindled significantly. “It’s much, much smaller; I would say far less than 10 per cent of our sales,” says Spoelstra.

University of Guelph’s Brady Deaton thinks the percentage of foreign ownership of Ontario farmland is likely very small.

“In a 2013 random survey of southern Ontario farmers, farmers identified approximately one per cent of the land they rented as ‘foreign’ owned,” Deaton says. In the survey, 207 Ontario farmers were asked questions about the largest parcel of farmland they rented, and only two indicated that their landlord was based outside of Canada.

“While this is the result of a small sample and more research is needed, this small percentage parallels foreign ownership of farmland in the United States,” says Deaton, noting the USDA reports show less than two per cent of U.S. forest and farmland is owned by foreign investors.

“Interestingly,” Deaton says, “Canadians are the largest foreign owner of forest and farmland in the United States.”

This article was originally published as “Our own land” in the March 15, 2016 issue of Country Guide

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