Ontario’s farmland remains valuable despite other economic hardships.
By Leslie Stewart
Despite various economic challenges, farmland values remain resilient across Ontario. In fact, the land market is relatively strong across the nation.
And those economic challenges are not insignificant, depending on your location.
Statistics Canada reports that Ontario producers saw a 14.8 per cent decrease on their farm cash receipts between 2022 and 2023, while both input costs and interest rates have been high.
“That was definitely more of a factor this year and last year, as most of the row crop farms have experienced a huge increase in production costs, and at the same time, a lower amount of farm receipts for their crops,” says Adam DeGroote, a real estate broker from Brantford.
“Add the higher interest rates to the mix and it definitely slowed a good number of buyers that were very active two years ago when rates and input costs were much lower.”
“There were more opportunities and deals available for buyers who had cash available,” says Jackie Pepper, broker with Farm Match. “Anyone who needed lending was much more hesitant to make a move.”
But farmland values remain strong.
A recent report from Farm Credit Canada indicates that farmland values continued to rise to an average increase of 11.5 per cent across the country in 2023.
Saskatchewan had the highest reported increase, coming in at 15.7 per cent. Quebec followed at 13.3 per cent, and Manitoba saw an 11.1 per cent increase.
Ontario fell below the national average at 10.7 per cent, as did Nova Scotia at 7.8 per cent, P.E.I. at 7.4 per cent, Alberta at 6.5 per cent, and New Brunswick at 5.6 per cent. British Columbia was the only province to report a decrease (3.1 per cent), but they were the province with the highest per-acre land value.
What keeps our farmland values climbing, and what can we expect in 2024? Better Farming spoke with some Ontario realtors to answer those questions.
Lack of inventory
Limited farmland inventory has kept the value of available farmland strong. With fewer properties hitting the market, what is available is valuable. DeGroote points out that demand continues to outweigh the supply of farmland from the 2023 market to now.
“I had and continue to have many ready buyers looking to buy, but there was not a great deal of inventory available to purchase, which of course brings up the price for those few properties that did hit the open market.”
Farmland for farmers
With some non-farming investors leaving the market due to high interest rates, quality and location of the land is important to buyers. This is a major driver of land values in certain locations.
“Buyers are more likely to be actual farmers right now as opposed to the past few years when it was more investors looking to park money in ag land,” DeGroote explains. “For the most part, the investor buyers I see now do farm the land with more of a hands-off approach, or they have share crop agreements. But most do still have some hand in the farming community.
“Investors have had a very strong presence in the Brant, Norfolk, and Oxford counties I mostly service, and have really brought up the land values accordingly. They’re fighting over the same limited amount of desirable ground.”
“There were not as many ideal farms on the market in 2023,” says Farm Match’s Paige Handsor. “There were a lot of buyers in the market before who weren’t farmers, so they bought land as an investment without background information.”
“Across Ontario, there are pockets where the demand is really high and competitive, and there are other areas that are less desirable,” says Pepper. “There are buyers who will only buy farms along the Hwy. 401 corridor. It’s a huge consideration.”
When it comes time to sell, realtors encourage farmers to temper their expectations based on the desirability of their land.
“Some people will call in based on articles,” explains Rachel Powell, realtor with Farm Match. “They’ll see a farm sold for $40,000 per acre, but that farm is in Oxford County and their farmland is not worth the same. A high price may not be realistic unless the location and other factors are there.”
“Pay attention to actual farm sales, and not coffee shop rumours,” cautions Hansor. “Pay attention to what’s going on in your area. The big thing we reiterate to everyone is to be prepared. Have conversations with your bankers and realtors and have a plan in place.”
Returning to ‘normal’
As we recover from the last few pandemic years, our economy is beginning to shift back to where it was before the global event hit. After a huge rush for land, Ontario’s real estate market also appears to be returning to ‘normal.’
“We saw a huge lull coming off of COVID,” says Pepper.
“Those couple years were crazy. But before that, it sometimes took six months to a year to sell a large property, or a farm, and it looks like that’s where we’re going back to,” adds Powell.
What’s in store for ’24
As things begin to return to normal post-pandemic, realtors are optimistic about the year ahead.
“I think the spring market has picked up a little more,” says Powell. “The interest rates have held and are projected to go down. People are a lot less hesitant (to buy and sell), and things have stabilized.”
“Land values are trending upwards again, and I am seeing multiple offers on quality properties,” DeGroote says. “I think this will continue and only get more common as 2024 continues.
“The market is starting to pick up again. I have buyers coming back into the market that have been sitting idle the past two years. There is a strong demand for quality farmland, and so far, there hasn’t been much hitting the market.
“I expect that if interest rates lower and the financial forecast continues to improve, buyer confidence will only increase and the pressure for that land that is available will drive prices higher still.” BF
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