Monday, April 10, 2017

Land prices are cooling

Land prices are cooling because crop profits are down, according to a survey by Farm Credit Canada.

And Aaron Goerzen, an economist with the Bank of Montreal, cautions that an increase in mortgage interest rates could lead to declines.

“I think the boom is certainly over, and the question now is what the adjustment to the new normal looks like,” he is quoted by the Globe and Mail today.

Farm Credit Canada reports that average farmland values rose by eight per cent in 2016, down from 10 per cent in 2015 and 14 per cent in 2014.

The main reason is lower global prices for field crops, said J.P. Gervais, chief agricultural economist at FCC.

“We’ve had tremendous growth for the last 10 years, very significant growth. We’ve basically doubled crop receipts mostly across the country,” Gervais said on a conference call with reporters.

“But I think it would be a little unrealistic to think that the next 10 years will be like the last 10 years.”

None of this matters much to farmers, however, because their land prices are all local and may be far different from the national averages.

For example, if there's a dairy farmer who covets the land, he has the steady income to bid higher. 

And anybody farming land that is likely to soon be bought for development is in a hot real estate market in Ontario.