A little bit of the city has come to the country, in the form of bidding wars for prime properties that are as far from Toronto’s most sought-after neighbourhoods as you can get.
Rising commodity prices and the shortage of arable land for sale are pushing the price of the lowly family farm to unprecedented levels and attracting interest from investors, according to ReMax’s annual farmland market survey.
Rich agricultural areas of Ontario like Woodstock/Stratford, as well as Bruce and Huron Counties, have seen the price per acre of farmland almost double just in the last two years, although at $5,000 to $15,000 per acre, the land is still a bargain compared to the $40,000 to $60,000 per acre it now costs for land in British Columbia’s Fraser Valley.
With the notable exception of that prime swath of southwestern B.C., the price of Ontario farmland is far outpacing gains in the west because our longer growing season translates into more cash crops per acre of land.
“The price of soybeans and corn has been hitting some staggeringly high levels and are anticipated to stick around for a while,” says Neil Currie, general manager of the Ontario Federation of Agriculture. “That gets capitalized into the land value.”
That has made farmland almost as good as gold even in the eyes of big-city speculators and hedge funds looking to cash in on climbing crop prices by buying up farmland and leasing it out to sharecroppers.
“That’s a relatively new phenomenon that puts a little volatility into things,” says Currie.
Just since 2010, for instance, farmland in the Woodstock and Stratford areas has almost doubled from about $8,400 per acre to $15,000 per acre this year, says the ReMax Market Trends, Farm Edition 2012 report.
In parts of Bruce and Huron counties, it’s climbed from between $7,000 and $11,000 per acre in 2010 to anywhere from $16,000 to $18,000 this year.
While the “black muck” of the Holland Marsh area remains the most coveted and valuable farmland in Ontario at $18,000-plus per acre, most of its farms pass from generation to generation and rarely come up for the sale, the report notes.
In fact, realtors who specialize in farm sales suspect most farmland deals are now being done privately and that just one-third even make it to the MLS system — like the sale earlier this year of a Windsor farm that still has locals buzzing.
A farmer there paid a significant premium — $7,500 per acre for land estimated to be worth about $6,000 to $6,500 per acre — to buy up the farm next door before it was listed on the open market.
“Whether this type of pricing is an exception or an indication of the market’s direction is yet to be seen,” says the annual report, which tracks farmland prices across the country.
Low interest rates and low inventory are also playing into the price escalations, says Bob Hulley, a realtor in Bruce and Huron counties where just 19 farms are now for sale. The shortage of supply has seen sales slip to just 24 so far this year, down from 42 by this time last year, the report notes.
That’s partly because some farmers who would like to retire are renting out their land instead, anticipating that this summer’s drought in the U.S. and other parts of the world will further boost commodity and land prices.
While the soaring prices are a welcome relief after 15 years of stagnation or decline, the short supply and high price of farmland is making it hard for existing farmers to expand operations and newcomers to get into the business, says Hulley.
“For years we’ve watched farmland decrease or stagnate while house prices were going up and up,” he says, adding only half tongue-in-cheek: “Now we’re starting to catch up to all those million-dollar homes in Toronto.”