Ontario saw a 22.2% farmland value increase last year, nearly three times the national average, according to Farm Credit Canada’s annual Farmland Values Report.
Limited supply of land coupled with increased demand in many areas contributed to the increase. 2021 was a “very active” year for farmland sales compared with 2020 when the pandemic began, said Allan Earle, sales representative with Culligan Real Estate Ltd.
Much of the demand came from large intensive supply-managed farm operations, cash crop farms, and part-time farmers, said the report. Many well-established farms are buying more land for succession reasons as the general farming population grows older, Earle said.
Eastern Ontario saw a 12% value increase in 2021 with an average price of $9,700 per acre, “the best value for your dollar,” said Earle. He says the lowest farmland prices were generally within Leeds County and west to Hastings County.
The Mid-Western region (Muskoka, Simcoe, Dufferin, Grey, and Bruce counties) reported the highest average land value increase at 28.4%, with an average price of $14,400 per acre. The lowest average increase was in the Northern region at 5.8%, with the lowest average price of $3,900 per acre.
The highest average land price was in Southwestern Ontario, at $23,500 per acre. Perth and Oxford counties generally had the most expensive land prices, Earle said.
The report said that farmland near large urban areas saw added competition from diverse buyers, like rural residential developers and hobby farmers. The main contributing factors to farmland purchases were high commodity prices and historically low interest rates.
“Many buyers are purchasing land in less expensive areas, which is driving up prices,” says the report. However, established farmers normally go for what’s close, says Earle.
Another contributing factor to land value increase was the “escape of urbanites to the country,” in search of homes with several acres, which might be prime work land, explained Earle. He says it’s the first time he’s seen this demographic compete with the market in his two decades of real estate work.
“Ontario is a big province,” Earle said. “It’s a very diverse landscape, so there’s different markets. It’s been a strong market and will probably stay strong with interest rates and commodity prices this year,” Earle said.
The Farmland Values Report uses benchmark farm properties and average sale prices in each region to analyze change in land value across the country. Ontario was the province with the highest increase.