Farm prices grow
City dwellers moving to the country behind increase. Crops aren’t the only thing growing in rural Ontario.
Prices for local farms and agriculture land grew a whopping 46% last year compared to the year before.
According to data on the Norfolk, Oxford and Brant Counties’ real estate boards’ MLS systems, 114 properties designated as ‘Farm’ changed hands in 2021 for an average price of $1,990,000. That compares to 109 properties sold in 2020 for an average price of $1,361,000 providing a median increase of $405,000 or 37%. (A median increase means half the properties sold for more and half sold for less.)
But some local realtors think these numbers might be distorted. Farm properties can vary in price depending on a number of factors including location, total acreage, type of soil, condition of out-buildings and whether it includes a residential home or not.
Bill Bouw, a realtor with Street City Inc. Brokerage that specializes in the sale of farm properties and with 13 years experience in Norfolk County, thinks these numbers might be accurate but do not reflect the actual true cost of farm values in our area. “These figures include farm houses and buildings and do not show the true value of the farm”, he says. For example, “one farm could have a $300,000 house and another farm may have a $1 million dollar house which could be 50% of the farm’s value,” he says.
Bouw’s thoughts are justified as in 2020 only two properties sold for over $4 million, but in 2021, there were nine properties which sold for over $4 million each; including a dairy and poultry farm selling for excess of $10 million each. These properties would have sold as ‘businesses’ based on their ability to make a profit, and not solely based on total acreage.
Bouw believes that to get the true value of a farm is to concentrate on what makes the farm money “and that is the land,” he says. He cites a report from the University of Guelph which shows farm land values in 2020, where an average value of 1 acre of producing farm land in Norfolk County was $14,000. In September 2021 a report from the Farm Credit Corporation (FCC) concluded that farm land prices from January 1, 2021 to June 30th, 2021 increased by 11.5% in Ontario which would bring the average price per acre in Norfolk County in 2021 to $16,100. This information follows a similar path to what he has seen in his 2021 farm real estate sales. “The recent lower dollar returns in ginseng and reduction of tobacco crop size grown in Norfolk County have had an effect on farm sales. However, the demand for good quality land to grow vegetables and field crops remains strong.”
Bouw thinks the demand for good producing farm land will remain strong in Norfolk County in 2022 due to the diversification of crops that are grown in Norfolk County and the ability of farmers to innovate and diversify their farm operations.
The same report quotes average 2020 land prices in Brant County as $11,000 per acre and $24,500 in Oxford County.
Dean Morrison, Broker of Record for Morrison Realty Inc. says the small hobby farms are selling for a premium.
“A lot of people want to get out of the city,” he says. “Small parcels with five to 20 acres go for a premium. Traditional sized farms with a hundred acres are still up, but not by as much. Farms in Norfolk County are selling for $14,000 to $16,000 per acre; up from $12,000 per acre, especially cash crop and vegetable farms.”
It’s a sentiment shared by Robert Koppert, Broker of Record with Royal Lepage R. E. Wood Brokerage in Tillsonburg.
Koppert, who has over 20 years experience in real estate, says “people are seeing the value of living in the country. Prices for small hobby farms are way up while big farms are up about 10%.” Koppert also says that commodity prices are high and farming is quite profitable right now. “Farmers had a good year and they are willing to re-invest.”
Farmland in Oxford County is selling for $20,000 to $30,000 per acre depending on the location within the county while Norfolk County prices are hovering over $14,000 per acre.
Bouw’s sentiments are echoed by Adam DeGroote, a real estate broker with Re/Max Twin City in Brantford.
DeGroote has been selling real estate for the past 10 years specializing in rural and farm properties. He has lived on a farm in Brant County his entire life growing up in the tobacco industry. He still grows cash crops on his own farms. His unique and specialized upbringing has given him first-hand knowledge of farms, land values and what the trends are.
DeGroote says farm land prices in the Brant, Norfolk and Oxford Counties have risen sharply due to non-farming investors parking their money in land.
“I have found that this trend has really escalated since COVID and been holding strong with very low available inventory. Farmland is seen as a safe and viable investment, one that doesn’t fluctuate nearly as much as the stock market. A lot of investors are even moving to the countryside and building their dream homes on these large acreages.” He says hobby farms have been affected the most. “Those under 50 acres have shot sky high, but really across all property sizes the demand and prices have risen dramatically.”
“It doesn’t matter much if farms have a residence as long as they are zoned to be able to have a residence built, that’s the key. Having access to water for irrigation is also a huge consideration most buyers expect. Also, the larger farm operations are generally always looking to expand their land base and the additional pressure from non-farmers has made it a more costly endeavour,” adds DeGroote.