By Bernard Tobin
It’s been a quiet January for farm appraiser Marleen van Ham. That lack of activity leads her to think that 2014 Ontario farmland prices will range from flat to a five per cent decline in some areas.
Van Ham, a broker and appraiser for Agri Choice Real Estate Appraisals Inc, says she’s done very few sale appraisals so far this year. “Last year I was doing appraisals in January for deals that were closing in February.” In many cases, when For Sale signs went up, offers were made immediately, banks received financing requests and within two weeks the request for appraisal was on van Ham’s desk.
The story is much different in January 2014.
“In some areas we are starting to see For Sale signs go up and they are staying up. That means one of two things – either seller expectations have increased even further, they are asking more than last year, or the buyers are not willing to go there,” says van Ham. “Right now we are seeing a break in the market. Usually when that happens,where properties are for sale for a longer period of time, it means that prices should come down.”
Enthusiasm for land deals has been tempered by tumbling commodity prices, but interest rates remain low and the short-term outlook is that money will remain cheap and available.
van Ham says buyers are aware that they will not likely see the annual 20 per cent increase in farmland value they’ve become used to in recent years. “A lot of farmers are saying ‘If I want to own it, I have to be realistic about my expectations. I’m probably not going to cash flow my farm from the crop sales and I’m probably not going to see a tremendous increase in land values, which kind of begs the question of why would you do it?’
“We hit the $20,000 per acre mark in Oxford and I think that’s a mental barrier for some people. I think buyers are probably a little bit more cautious now.”
van Ham says until some properties actually start to sell, it’s hard to determine where the market is. January is not a strong closing month for land deals. Typically, signs go up in January/February, deals are made in February/March and they close in April.
Since the last big closing month, April 2013, van Ham reports that prices have continued to increase significantly in many Ontario counties. She estimates that prices in Huron and Perth counties increased 20 per cent during the April 1, 2013 to Jan 1, 2014 period; Oxford is up 10 to 15 per cent; Elgin 10 to 20 per cent; while Norfolk, Halton and Middlesex have been flat.
van Ham says April will prove to be a litmus test for farmland prices. That’s the month when about 60 per cent of land deals close. “If I had a crystal ball I would guess that prices are going to stay stable and decrease marginally, up to five per cent in some areas.”
Van Ham says Ron Phillips, her predecessor at Agri Choice, summed up best how appraisal activity is reflective of land prices. He said: “When property values are going up we are busy. When property values are going down we are busy. It’s at the top of the mountain or the valley when we have nothing to do.”