The pandemic might have slowed the economy in 2020, but it didn’t slow the growth in land values.
In fact, the ongoing global viral calamity is, in its own way, another factor contributing to per-acre purchase costs.
In his annual “Southwestern Ontario Land Values” report, Ryan Parker, partner with London area real estate appraiser Valco, said the farm community managed to find ways of buying and selling farmland throughout 2020.
Why it matters: While good news for those looking to sell, farmers trying to expand their acreage face increasingly burdensome per-acre costs.
In an interview, Parker indicated this reality — and the fact that prices continue to rise — came as no surprise. Indeed, the major factors contributing to the increase have been consistent for some time.
There are nuances within each, however.
2020 farmland values, by the numbers:
- Average 2019 to 2020 change — 5.33 per cent
- Average annual change from 2010-20 — 10.72 per cent
- Southwest Ontario 2020 median — $15,000 per acre
As described in the report, 2020 continued a long-standing trend of historically low interest rates, with the pandemic being responsible for yet another significant decrease in borrowing costs.
With good yields preceding high prices — the current disparity between old crop prices and futures aside — the 2020 crop year was also a profitable one for much of the province.
With more readily available cash and a lower loan burden, growers felt no need to pull back on land acquisition.
“The futures prices for (corn, soybean, and wheat) are well below the old crop prices but are still significantly better than most we have seen in the past six to seven years,” said the report. Livestock density in the traditional livestock areas of Ontario continues, as it likely always will, to have an impact on land values.”
If prices and interest rates continue on this trajectory, Parker believes it’s possible the rate of increase in 2021 could double that seen in the previous year.
“We’re not seeing too many new sales that are not new highs. It’s tough to gauge though because there are not a huge number of sales,” he said.
“That leads me to believe we’re going to see some jumps.”
Non-farming investors snap up land
Pressure from outside the farm community has been increasing too. The report indicates investors are confident in farmland values and continue to buy land.
Parker said these investors mainly fall within two different groups: national investors (such as pension funds), and private residents (urban residents, non-farming business owners).
The former could be buying land anywhere, and were not commonly seen in Southern Ontario before 2010. The latter is partially a continuation of the urban exodus phenomena, which has been amplified by the pandemic.
“There are a lot of 50 acres farms which are tough for farmers to buy if they are close to urban centres… The other thing is COVID. People want to get out of the city,” he said.
Parker also identified a northward movement of farmers from southern counties, which continues to close value gaps between the regions. It’s a trend that has been on the rise for more than the last decade, and one including a wide swath of territory — from the shores of Huron to Temiskaming. Grey and Bruce counties, however, appear to be drawing the greatest number of agricultural migrants.
“That gap continues to close because they are coming in with more cash than usually local guys have… sometimes coming into it with a different mentality. They’re maybe being more aggressive about growth,” Parker said.
The movement of northern farmers south is, by comparison, rare.