According
to a Re/Max report, Canadian farmlands have shown good year-over-year increase
in many of the rural areas, but low commodity prices indicate appreciation in
coming months.
Almost
all agricultural centres reported limited inventory levels and continue to add
to strong rising pressure on the rate per acre in 88 per cent of the markets surveyed.
High value of commodity with low interest rates has created a perfect situation
for growth in the past year in demand for farmland.
Regional
director and executive vice-president of Re/Max Ontario-Atlantic Canada,
Gurinder Sandhu, feels that no actual fallout is seen due to the decreasing
value of commodity this year. We may see some moderation with many years of huge
gains. There has been a decrease in purchase by many investment funds that are
moving ahead cautiously. This trend is expected to continue with rates stabilizing
at present levels. Demand will stay healthy for near future with the positive
long-term position for agricultural markets around the world.
According
to the report, the percentage of land value increase ranges from one market to other
with maximum increase seen in Alberta and Nova Scotia land for sale. It is best in the London-St.
Thomas’ Middlesex West area, Kitchener-Waterloo and Windsor/Essex County in the
east. The rates have held firm in the Annapolis Valley and Fraser Valley
year-over-year.
Most
sought after proposition is the cash cropping land and empty land is in high demand.
You can gain a lot from irrigated and tiled land. Premium is paid for land
close to farm and adjoining area. Livestock farmers have also joined the cash-cropping
business and a few West Canadian markets are transforming vacant land into grain
land.
Re/Max, regional
executive vice-president Elton Ash feels that the end-users are the key drivers
of the market. It can be livestock farmer or cash cropper economy of scale
continues to support growth. There are several buyers but sometimes the momentum
is hampered due to a scarcity in the listing of farmland. Institutional as well
as individual investors are active in Canadian agricultural market even today,
but the number has diminished recently.
The
report also suggests that individual and private transactions account for almost
50 per cent of the farm sales and deals between neighbours is common. There are
reports of multiple offers, but typically property is moving at fair market
value. The demand is really strong but there is some sign that it is cooling. Number
of properties that did not move in the auction have gone up but were sold at good
rates on the open market. This shows that buyers have become more cautious and diligent.
