By Tom Collins
LONDON — High-end farmland prices continue to rise and land could fetch as much as $30,000 an acre in Oxford County in 2019, says Ryan Parker of Valco Real Estate Appraisers and Consultants.
In Oxford County in 2012, the highest-priced land sold for $23,500 an acre. In 2018, there were numerous sales in the $23,000- to $25,000-an-acre range as demand is high and supply is low. The top farmland sale in Western Ontario was about $29,000 in Oxford County, he said.
“We’re going to continue to see some new highs (in 2019), and we may be talking about a sale over $30,000 an acre (excluding buildings),” said Parker.
The median price of Oxford County land last year was about $20,000. When Parker first started his study of median farmland prices in 2010, the median price in Oxford was about $10,000 an acre.
Farmers say high land prices are a double-edged sword: It’s great to own land at those prices, but it makes it tough if you need to buy more acres. Oxford County is considered the dairy capital of Canada. According to OMAFRA, there were 304 dairy farms in Oxford County in 2017, the third highest of any Ontario county (Wellington had 378 and Perth had 331), but Oxford shipped 356,239 kilolitres of milk that year, the highest of any Ontario county.
Kevin Armstrong, a Woodstock cash cropper and district 7 (Waterloo, Oxford) director with the Grain Farmers of Ontario, said he has heard rumours of land selling for close to $30,000 for a few years.
“I don’t understand how people are able to pencil it out,” he said. “The thing that makes me wince the most is a young farmer trying to start out and get a foothold in the business is immediately kneecapped with the price of land. They’ll spend their entire career paying it off.”
He added that increasing land prices also increase property taxes. “It’s not an immediate impact, but a long-lasting one. MPAC rarely reduces the price of your taxes.”
While many believe supply-managed sectors are the drivers of higher prices, Rob McKinley, an Oxford dairy farmer at Beachville, said established farms across all sectors are pushing up the price.
“If you’re a cash crop farm that’s farming more than 10,000 acres and more than half of it is paid for, you have more flexibility in your cash flow,” he said.
He said while aggressive dairymen trying to grow their farm could put pressure on prices, McKinley did know of at least two Oxford County dairy farms for sale that have been sitting for a number of months.
Farmers are going to sell for what the market demands, he said. “If I were to put my farm up for sale, I would take nothing less than $25,000 (an acre).”
Realtor Alister MacLean, of Sutton Group in London, said high land prices are simply the result of low supply and high demand. He said his own statistics are different than Valco’s. He said if you exclude buildings, Oxford County farmland is selling for a high around $22,000 an acre.
He added it’s difficult to give an average for Oxford land prices as there could be as much as an $8,000 per acre difference between south Oxford’s sandier soils and north Oxford’s prime land.
Parker said the majority of sales chosen for his report were vacant land, with the exceptions being minimally improved properties (i.e. older house and shed), However the value of those buildings were taken out of the equation.
Despite the increases in high-value land, the median land prices will continue to plateau, he said. Every year, Parker releases a report about land prices in 11 Western Ontario counties. He looks at median prices instead of the average as a way to remove outliers that might swing numbers too widely in either direction. This year’s report looked at the price per tillable acre of 540 sales in 2018.
Last year, median land prices only increased by 3.6 per cent thanks to higher interest rates and lower margins, said Parker.
The highest increase was in Grey County at 13.77 per cent, the fifth time in seven years the county has seen median land prices jump by double-digit percentage points. Parker attributed this to farmers — mostly the Mennonite community — moving to Grey County for affordable land.
Elgin County had the highest decrease at 6.34 per cent. Parker said that decrease was an anomaly, chalking it up to a low number of sales in higher-value areas and more sales in the lower-value areas. He expects the median price in Elgin to rebound in 2019.
