Land values remain strong despite economic headwinds

by

Even as inflation continues to grow and increasing borrowing costs have put pressure on farm incomes, farmland values across Canada rose 7.7 per cent in the first half of 2023, according to Farm Credit Canada’s Mid-Year Land Value report.

Tight supply has continued to support land appreciation for now, says FCC chief economist J.P. Gervais. But demand is likely to cool as rate hikes take full effect, pointing to a potential stabilization in prices going forward. As Gervais notes, land value growth is at a slower place than recent years — but still a significant appreciation.

Gervais, in conversation with RealAg Radio host Shaun Haney below, discusses the findings of FCC’s 2023 Mid-Year Land Value report — which tracks farmland transaction prices across the country — and says landowners are continuing to see farmland as a reliable investment, as tight supply continues.

“The return has been very good… you’d be hard-pressed to find a ratio of expected return relative to productivity that shows up better than farmland,” explains Gervais. However, after years of rapid gains, prices are at all-time highs relative to production potential. As borrowing costs rise, fewer buyers will be able to afford land purchases based on current cash rents. (Story continues below video)

“Going forward, I do think that this is going to continue to slow down demand, and with demand slowing down, I would suspect that would lead to a slower rate of appreciation,” explains Gervais. Despite some of the near-term challenges, Gervais remains optimistic about the agriculture industry’s long-term prospects, given global food security concerns.

Gervais anticipates farmland will likely lose some speculative value, but will continue to remain a solid investment.

Read more on the report here. 

Wake up with RealAgriculture

Subscribe to our daily newsletters to keep you up-to-date with our latest coverage every morning.

Wake up with RealAgriculture

Please register to read and comment.

Privacy Preference Center

Necessary

Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.

gdpr, __cfduid, PHPSESSID, wordpress_test_cookie, woocommerce_items_in_cart, woocommerce_cart_hash, wp_woocommerce_session, wordpress_logged_in, wordpress_sec, wp-settings, wp-settings-time, __cf_mob_redir, wordpress_cache, realag
__cfduid

Marketing

Measuring interactions with the ads on the domain.

__gads,fsk_ut_2317
IDE

Statistics

These are used to track user interaction and detect potential problems. These help us improve our services by providing analytical data on how users use this site.

_ga,_gid,_gat,_cb,_chartbeat2,_chartbeat4
_ga,_gid
metrics_token

Preferences

Preference cookies enable the website to remember information that changes the way the website behaves or looks, like your preferred language or the region that you are in.

chartdefaults, comment_author, comment_author_email, comment_author_url
JSESSIONID, _os_session,anonymous_votes,csrf-param,csrf-token,user,user-id,user-platform,intercom-session,intercom-lou,intercom-session
personalization_id, tfw_exp

 

Register for a RealAgriculture account to manage your Shortcut menu instead of the default.

Register