When real estate values are skyrocketing in urban centres, the impact is felt everywhere, including on the farm.
Farm Credit Canada (FCC) reports that farm values rose by 10.3 per cent in British Columbia during the first six months of this year. That comes on the heels of a 10 per cent increase during the last six months of 2005.
FCC says the increase is "in keeping with a buoyant provincial economy." In southern B.C., urban sprawl and the limited supply of arable land in the Fraser and Okanagan valleys have resulted in stiff competition for land, and rising prices. It says values in the Abbottsford and Surrey areas are increasing again because of strong demand from the berry sector.
"The northern regions, such as the Peace River area, continue to have a strong resource sector, creating upward demand for rural acreage and investment in agriculture," says FCC. "Less populated areas of the Interior involving woodlot, forestry and livestock production are showing less optimism with smaller price increases." Land values on Vancouver Island have stabilized after increases last year.
In Alberta, the housing market is bursting at the seams as the oil and gas industry fuels enormous growth. Farmland values rose 3.9 per cent from January to July. "Farmers close to urban centres are selling and moving farther away to obtain a larger land base," says FCC. "This relocation trend continues to increase the area of urban influence on farmland values." It says prices are increasing in the corridor between Edmonton and Lethbridge, and that irrigated land prices increased in southern Alberta due to demand from the potato and feedlot industries.
Farm Credit Canada, which provides financing to the farming industry across the country, has produced the Farmland Values Report every six months since 1985. FCC established a system of 245 benchmark farm properties, representing different classes of agriculture and current land use. It appraises them every January and July using recent comparable sales.
Newfoundland and Labrador had the next-highest increase in value, at 2.9 per cent. "The increase is a result of the rising price of farmland in the western half of the province," says FCC. "Livestock operations seeking forage land are increasing demand. Some retiring farmers sold smaller parcels of land, which purchasers added to their larger existing land base."
In Manitoba, "past values appear to have been held back by poor crops and weak commodity prices. Previous increases tended to be driven by sale of land suitable for specialty crops such as potatoes," says FCC. "The current increase (2.8 per cent) is more general and less focused on specialty cropland."
A provincial forecast from CIBC World Markets says that Manitoba's agriculture was held back in prior years because it was either too dry (2004) or too wet (2005). It says that while provincial crop production could still run slightly below average levels this year, poor harvests in other countries "lend support to prices and point to healthy future cash receipts." That should result in better farmland values.
Ontario came in next, with an increase of 2.1 per cent. The housing market in Ontario remains strong but sales and price increases have returned to more balanced levels than in the last five years.
Concerns about urban sprawl prompted the government to establish a greenbelt area to limit development, and that in turn drove up prices beyond the greenbelt. FCC says prices were up in the Niagara region, Haldimand Country, Simcoe County, Durham Region and Victoria County.
"Overall, urban buyers relocating to rural areas continue to have a significant impact on land values in most areas," says FCC.
Nova Scotia's farmland values rose two per cent. Demand is strong in the Antigonish and Annapolis Valley areas.
New Brunswick's values were up by 1.1 per cent, says FCC, largely because of uncertainty in the beef industry as farmers recovered from the impact of the "mad cow" crisis. However, a higher-quality crop of potatoes prompted some potato producers to buy more land, pushing up values.
In Saskatchewan, the CIBC report says that crop production has rebounded from a "very poor 2005, with volumes and quality both solid." FCC says the province's "increases are consistently below 1.0 per cent for each six-month period … . This trend ranks Saskatchewan farmland as one of the lowest in Canada." It notes that grain and oilseed prices have been weak, keeping prices down.
However, FCC says farmland is still considered a good long-term investment. "This is evidenced by current owners holding land and investors buying land with the expectation of future capital gain." The most recent period saw the province's farm values rise by 0.8 per cent.
In Quebec, the increase was 0.6 per cent. FCC says pork and grain prices remain low, reducing cash flow and the amount of cash available for investment purposes.
In P.E.I., Canada's smallest province, farmland values have shown no change since 2004. While "positive developments over the past six months within the major agricultural industries are providing optimism," says FCC, "this has not yet translated into increased farmland transaction values."
