The average cost of farmland in Canada has spiked by over 12% since last year, a new report by Farm Credit Canada (FCC) has found.
Prices surged by 12.2 percent between July 2022 and June 2023. According to FCC, this upward trend persists in spite of the efforts to manage inflation via interest rate hikes.
“Even if higher interest rates are slowly eroding buyers’ purchasing power, limited availability of farmland for sale is generally still pushing prices higher,” wrote analysts.
“Higher borrowing costs and pressures on the Canadian and global economies have made farm operations cautious regarding capital expenditures and investment. On the other hand, a limited supply of farmland available for sale and robust farm income have contributed to higher land values in the first six months of 2023.”
The highest spike in farmland prices, 17%, was reported in Saskatchewan.
“Saskatchewan leads the country in the average farmland value increases for this first half of the year at 11.4%. Most regions saw increases in the 7-11% range, indicating relatively steady demand province-wide,” wrote FCC.
“The North East region stood out with the strongest demand, leading to above-average growth relative to the rest of the province. Low precipitation has led lately to an increased demand in heavy clay soils, where moisture retention has been rewarded with higher prices.”
Saskatchewan was followed by Manitoba with a 12.8% increase in farmland prices.
By far, British Columbia reported among the smallest changes in farm prices, with no change on average as “some grown in one region (was) offset by small declines in another.”
“There’s evidence that elevated land prices coupled with higher interest rates are leading to a slowdown in sales. The South Coast, British Columbia’s most expensive region, has been experiencing a small pullback in land values, whereas other regions have recorded steady or slightly increasing land values.”
