Farmland sales heat up
A farm realtor highlights market issues that are keeping his sales strong.
Bob Lane's company sold 223 farms in Saskatchewan, Manitoba and Alberta last year – a healthy 20% jump from the 185 farm properties they sold in 2003.
Selling more than four farms per week has given the Regina-based realtor an authoritative perspective on the issue.
"Some bankers I know tell me they've never been busier with farm mortgages," says Lane. "Things were a bit slow for a couple of years there, but I think we're back on track." Here's why.
Farmers rebalance portfolios toward farmland. Lane believes that, after three years of so-so stock market returns, many producers have decided to stick with the asset class they know best.
"Land is where their family wealth has come from," he says, "and they're very comfortable with that."
Interest rates stay low. The Bank of Canada raised the key Bank Rate twice in the fall of 2004. Could this trend pour cold water on a hot market for farmland? Lane doubts it.
"We still have some of the lowest rates in the past 30 years," he says, noting that producers still consider credit conditions to be highly supportive.
Environmental regulations spur land purchases. In many parts of Canada, livestock producers are faced with more stringent regulations for the management of manure. If a farmer has been spreading manure on rented land, it's tempting to buy that land instead, to ensure access well into the future.
Higher value crops add value to land. Many farmers in Lane's trading area have achieved excellent results from pulse crops in recent years. Areas that grow these crops especially well – such as southwestern Saskatchewan and the Regina Plains – tend to attract renters. "Farmers are looking for short-term rentals to grow pulses," Lane says. In many cases, the short-term renter eventually becomes a buyer.
Lifestyle farmers flock from the city. Across Canada, farmland within commuting distance of a major city is being snapped up by city people who want to experience country living. The finite supply of land, combined with a seemingly infinite supply of would-be weekend farmers, has put upward pressure on prices.
Europeans still a factor. Over the past 10 years, immigration of European farmers to Canada has been a significant issue in farm sales. While some report a slowing of this trend, Lane sees it going strong. He estimates that in 2004, 10% of all farms sold by his company were purchased by newly arrived Europeans, mainly from Germany and Great Britain.
"We've noticed how much importance they place on having a nice, well-developed farmyard," says Lane, "so it's not just about the farming potential of the land."
Generational renewal on track. Perhaps the most welcome farmland trend, in Lane's view, occurs when a younger generation of owners takes over. Of course, this often occurs via transfers within the same family. Increasingly, however, the new blood is moving to the Prairies from other parts of Canada.
"We're seeing lots of young folks coming in," says Lane. "It makes sense. If you can sell a farm in the southern mainland of B.C., for example, you can set yourself up here and still keep some money in the bank. It's allowing these producers to be very well capitalized, and in great shape for the future."
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