What Do You Expect Farm Real Estate Values to Do Now?

Posted by Phil Spoelstra on Thursday, December 21st, 2017 at 1:31pm.

From the coffee shops in rural Ontario to the GO trains bound for the GTA, farming and particularly farm values have been a hot topic these past few years.

Canadian farmland between 2010 and 2014 increased by 75.9% according to Farm Credit Canada (FCC) so naturally farmers and non-farmers alike have been paying attention!

The most common questions we’ve received over the past year, both at farm shows and kitchen tables, have been “When is this going to stop?” “What do you expect values to do now?” and “Will this market crash?!”

The big surprise looking back at 2016 was the estimated 5.88% increase land values in Southwestern Ontario experienced. In fact, Ryan Parker (Valco Appraisers) in his annual land values report, indicated only 3 of SW Ontario’s 12 counties had a very slight pull back where most counties posted very healthy gains yet again.

The increase last year was slightly higher than most predictions, however it did align with the prevailing thought that values would slow from their brisk pace of double digit growth. This was something Ron and I experienced hands-on and were quite happy to see.

A trend that we noticed throughout 2016 and into the beginning of 2017 were slightly more cautious buyers. Many farmers in “growth mode” have made one or more purchases over the past 5 years. While they are still looking to add more land to their operations these buyers are more patient, often waiting for a more ideal parcel to come available rather than bidding on anything that hits the market in their area.

This has caused the farms that are in poor repair, need tile, have rolling land or have fields that aren’t square to see a small reduction in demand and thus a slight pull back in value. This makes it all the more important to ensure your farm is prepared for the market – not just a “for sale” guarantees the best price any more!

Despite this trend the ideal farm, perfect location, tiled, at and square does still command top dollar, and in some cases last year we did set new record highs in a few counties.

While Ron and I deal in all categories of farms across SW Ontario we did experience some very interesting trends in the Dairy and Poultry markets. The 2016 slump in milk prices caused an almost immediate pull back in values for ongoing dairy operations however the increased availability of quota and improving milk prices has brought back strong demand for not only ongoing operations but now for empty dairy operations as well.

The increased availability of quota has caused many barns to be filled to capacity and left families seeking empty dairy farms both locally and across county lines where they can set up a son or daughter by splitting off a portion of the existing herd at home and moving them into an empty facility, allowing for further growth at both locations. Similar demand for empty barns has been seen in the poultry market due to their increases as well.

One final trend to share would be 
the increased interest from the EU, specifically the Netherlands 
and Belgium. We have had a 
limited number of European buyers over the last 5 years but are starting to see a resurgence from across the pond as governmental regulations and social pressure are causing a large group of younger farmers to consider selling their farms and immigrating to Canada.

Our trip to Holland in March will see us meeting with over 80 such farmers looking for more information on our marketplace and the farm operations available in SW Ontario. Stay tuned for an update on this later this year.

In closing, land values have slowed their growth pace and the ideal situation in our minds would be to see stable inflationary growth
 (2 to 3%) over the next few years and avoid any major corrections. This will of course be contingent on the two major factors of interest and commodity prices, both of which don’t appear to be changing drastically in the near future.

 

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