Farmland values continue to grow

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.

Chinese Look to Buy Land in Ontario

Ontario Farmlands Attract Chinese Investors

Chinese investors are making huge inroads into the real estate in Canada, which include large areas of farmlands, especially in Ontario.  Monaxxion, which is a Montreal Based firm financed primarily by the Chinese investors, is planning to buy about 40,000 hectares of farmlands in Canada.  According to this company, which looks after the investment needs of Chinese immigrants, the current investment would be around $300 million to buy agricultural land for sale in Ontario.  The firm is also confident of getting a further $200 million worth of investments.

Monaxxion had been trying to buy land in western Canada and Quebec but were deterred by the local regulations.  The company along with its Chinese investors are now turning to Southern Ontario land because the regulations are favourable here and it is easier for a foreigner to do land dealings in Ontario as compared to other areas of Canada.

Though the current target for purchase is 40,000 acres, the firm says that this was only a beginning.  Earlier it was the Europeans who had the money to buy land in Canada.  The situation has now changed and the money is now pouring in from China.  Chinese are not fussy about the kind of farmland being purchased as they are basically only interested in investment.

According to officials of Monaxxion, the local farmers are also keen to sell their land to the Chinese.  This is evident from the fact that the company is getting an average of 30 calls daily from farmers who are willing to sell their land.  The company has so far received 850 calls mainly from farmers from Ottawa area and Quebec border.

Chinese investors are also very interested to do partnership with Canadian farmers, says the company.  They have shown enthusiasm about the methods adopted by Canadian farmers.  The Chinese also may bring in workers from China in future to do the manual labour in these farms. Though the Chinese had first looked for buying land in Quebec, they have now turned to Ontario, which they perceive to be a better market with favourable laws.

The Chinese investors are also attracted to Canada by the fact that the economy is stable and the land is still available at much cheaper rates as compared to other countries.  Also there is no barrier for any foreigner to invest in farmlands in Canada, except for non-residency taxes.  Due to this, much more investment can be expected from China in the coming days.