Demand for farmland in southwest Manitoba has risen steadily over the last five years, according to a new report.
The RE/MAX Farm Report 2014 said that the price of farmland in southwest Manitoba has risen from approximately $1,000 per acre five years ago to between $1,500 and $1,600 per acre. In some instances, sellers are testing the market by asking for $2,000 an acre.
In 2013, the price of farmland averaged between $1,350 and $1,650 per acre.
“Prospective sellers hope that the value of their land will reach $3,000 per acre, a price more common in areas to the east,” according to the report.
In comparison to other regions of Canada, RE/MAX reported that demand in Saskatchewan and Manitoba has been softer, since prices for the most common commodities, such as wheat, barley, oats and canola, have decreased by 30 per cent over the past 12 months.
Still, lower crop prices failed to significantly impact the value of agricultural land, though sellers were hit by a harsh winter and reported seeing fewer transactions and an increase in the number of days on the market.
Flooding has been a problem in southwest Manitoba, with land inundated by heavy summer rains. Some farmers have not been able to plant crops for the past three years due to above-normal precipitation flooding their land.
Despite the problems, Elton Ash, the regional executive vice-president for RE/MAX of Western Canada, said: “Western Canadian farmers and their families continue to display resilience, surefootedness and enduring optimism.”
According to the report, many of the sellers of farmland are approaching retirement age and have no children willing or able to take over the family business.
“The majority of prospective buyers comprise local farmers who are willing to wait for a deal as opposed to new entrants to the market.
“The result is that most farms remain on the market for at least 12 months, an increase over previous years. Deals are typically closed within the first few months of the year and it is rare for any transaction to be finalized after May 11,” reported RE/MAX.
While European buyers had been a factor in previous years, their influence has declined with the rise of the Canadian dollar against the euro, which began in 2010 and peaked in 2012 and 2013.
The report indicated that government programs for young buyers do exist, but they offer few incentives for the average farmer, who is more likely to rely upon a commercial lender to finance a land purchase.
“”Overall, the most common type of buyer is the experienced farming family looking to expand an existing operation,” according to the report.
“The report also found that very local considerations, such as the proximity to a processing facility or the prospective buyer’s existing holdings, drove individual transactions.
“The Manitoba market is expected to remain steady in the near future,” the report predicted, “with no spike in either the number of sellers or entrants to the market.
“While the price of crops does affect the demand and price for farmland, it generally takes six months to a year for the real estate market to respond.
“Experienced buyers look at long-term trends before making a purchase.”
In some parts of Ontario, farmland values are at record levels, said Gurinder Sandhu, the executive vice-president for RE/MAX Integra’s Ontario-Atlantic Division.
North of the Greater Toronto Area, agricultural land slated for development reached $54,000 per acre, which is double the price for land used for farming.
British Columbia had both the highest and lowest land values in the country. Dairy farms in the Chilliwack-Fraser Valley area sold for up to $63,000 an acre.
But Peace River North land sold for the lowest rate at between $750 and $1,550 per acre.
Alberta is benefiting from a short supply of inventory. Well-financed farmers are lining up and are ready to make a deal at a moment’s notice.
“Tile-drained land sold for as much as $10,000 per acre in southern Alberta, which represents a 20 per cent increase over the previous year,” according to the report.