London area hot spot for land buys
Tuesday, September 10, 2013
by BETTER FARMING STAFF
Buying farmland anywhere in Canada will cost you more this year but the pressure on price is greatest in the London area, mostly Middlesex County.
David Brown, executive vice-president brand marketing and promotion for Remax, says the London area stands out in the competitive market for farmland.
“We’ve seen as much as 40 per cent of our sales (in the London area) go in multiple offer,” Brown said. He was commenting on a Canada-wide Remax report on farmland. Values, according to the report, have reached record levels so far in 2013.
The report shows land in all of Middlesex County is trading at $12,000 an acre, up from $10,500 last year in Middlesex West and $7,500 in Middlesex East. The price leaders in Ontario continue to be Woodstock/Stratford and Kitchener-Waterloo, where land is trading from $15,000 to $18,000 an acre. South Simcoe’s Bradford area tops the field at $25,000 an acre with the Holland Marsh next at $20,000 an acre. The most expensive land in the country is in BC’s Fraser Valley, where prices range from $40,000 to $60,000 an acre.
“While demand is tight,” Brown said, “it’s hard to imagine that we are going to see much moderation, especially in the London area.”
Brown says the London area has buyers who are multi-generational farmers and quota farmers in the market. There is also an upsurge in hobby farmers.
However, there are a couple of factors chilling the market generally. Commodity prices are down and it is harder to get money.
“There’s a more conservative tone to the market,” Brown says. “People are being a little warier. They’re not just jumping in and paying huge prices.”
Well, not everyone.
Tom Eisenhauer, president of Bonnefield Financial, a Canada-wide farmland investment manager and property management firm, says a lot of farmland in Canada is trading at “ridiculous” prices, at least on the surface.
Sometimes land trades seem high at $15,000 to $20,000 an acre, especially in southwest Ontario. However, he adds: “When you peel back the onion, often times those tend to be pretty small lots where there’s a farmer next door who is price indifferent about buying that piece of property just because it allows him to make one less turn on his combine when he’s harvesting.”
Eisenhauer says price influencers can include quota “where we see the value of some of those quotas getting reflected in the crazy values of the land.” He says also there is development pressure in some areas of the country, especially the Greater Toronto area.
Where there are no other influences, Eisenhauer says land is good value.
“If you go to the middle of nowhere in Saskatchewan and look at farmland, or really where there is no development influence and not an influence of quota, by our estimation the earnings potential that land can generate over a three-year crop cycle is pretty well represented in the price.”
Dale Litt, senior appraiser at Farm Credit Canada, says their spring report was still showing an upward movement in the price of farmland. However, they will not be producing a new report until April of 2014.
“I don’t know if things really leveled off that much (since the spring report),” Litt said. “There have been gains in different areas of the province for sure. Other than that, I can’t really comment until we have another report.” BF