Tuesday, September 9, 2013
Real Estate News
Farmland Values Spike
Scarcity drives up prices across Canada
Released by the Kimberley Kofman, Point Blank Communications/Voice file photo
hile Canadian farmland values posted serious year-over-year increases in most rural communities, lower commodity prices are expected to temper appreciation in coming months, according to a report released today by RE/MAX.
The RE/MAX Market Trends Report: Farm Edition 2013, highlighting trends and developments in 17 rural communities throughout Canada, found that limited inventory levels—reported in virtually all agricultural centres—continued to contribute to strong upward pressure on the price per acre in 88 per cent (15/17) of markets examined. Peak commodity values and low interest rates created the ideal climate for expansion over the past 12-month period, spurring unprecedented demand for farmland.
“No real fallout has been
experienced as a result of diminished commodity values so far this
year,” says Gurinder Sandhu, Executive Vice President and Regional
Director, RE/MAX Ontario-Atlantic Canada. “Yet, some moderation is
likely, given several years of back-to-back record-setting gains.
Some investment funds have already scaled back on purchases, still
moving ahead but at a more cautious pace. We expect the trend to
continue, with prices stabilizing at current levels. Demand, on the
other hand, is expected to remain healthy
While demand remains exceptionally strong, there is some evidence that cooler heads are now prevailing.
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.
Transactions have climbed in
Southwest Manitoba, Northern Saskatchewan and East Central
The competition among expanding farm operators is creating greater difficulty for young start-ups, smaller operators, and new immigrants, with affordability a serious issue. Programs offered by Farm Credit Canada (FCC) are helping some make the foray into the business. Others are realizing the dream of farmland ownership through the help of older farmers and/or relatives. Ultimately, the result has been fewer, but larger farms overall—a trend that holds up from coast-to-coast. Succession is also playing a significant role and limiting farmland supply.
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. The income potential—particularly given the poor return on other financial investment vehicles—is another factor exacerbating limited inventory levels.
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Download the Trends Report here.
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