The soaring value of Canada’s real estate farmland

The rise in price of cash crops and grains has raised the price of farmland in Canada. Developments in farming technology and the rising demand of farm produce have accelerated the property market in this sector. Farmers are expanding their acreage to grow their farms, causing a price bubble that can only be detrimental to the property market. Statistics from Farm Credit Canada have shown that the value of farmland has no average risen by 12% since 2008. This amounts to 5 times the inflation rate of the country. In 2012, the demand in certain provinces was near 20%. Quebec had a property market growth rate of 19.4%, Saskatchewan rose to 20% while in parts of Alberta, the inflation stood at up to 25%.

Steady rises in market values have proven to be a windfall for landowners who are selling off their land to cash in on the high returns. Real Estate agents are also laughing all the way to the bank, because higher prices mean higher commission and the mirage of investment lure more and more clients towards purchasing farmland.

Rising property rates have dire repercussions, especially in the farming sector. Firstly, the return on investment is simply unattainable, and higher land prices cannot be recovered through basic produce. A farmer, for over 20 years, Gary Brien rears sheep on his Ontario farm. He feels that the rise in property value does not affect him as he does not intend to sell his property. He also blames the bumper harvests witnessed in the last few years for the price increase. “Farmers don’t like paying income tax,”. “And if they get a bunch of money and have a choice to pay income tax, or buy more land, they buy more land.”

Bigger farms mean more production and bigger industry. The biggest losers here would be start-up farmers and new ventures who would have to compete with the economies of scale enjoyed by these large firms. According to Farm Credit Canada, the average Canadian farmer is 60 years old. As age catches up with the preceding generation, there is need to transfer trade and tools to the new generation. Many farming families split as the current generation prefers city life to farming life. With no one to pass on the baton to, the Canadian agricultural sector may be headed towards disaster.

Foreign investors also amplify the crisis. As more and more people see promise in the Canadian property market, the demand for land in Canada rises. Foreign investment comes at the expense of loss of control. Foreigners control the market, leasing land to locals at high rates. Higher rent, means higher cost of production and consequently higher prices for the end consumer.

While Provincial Governments have restriction on how much land foreign investors can own, the buyers collude with locals to work out back door strategies. This poses a great risk for the nation as a whole. With Canada being the leading supplier of several commodities across the globe, a rise in prices will affect the whole world. Also, as droughts and famine rage across Northwestern USA. The Canadian farming belt is obliged to serve that market as well.

To combat the superfluous situation, the Government should regulate sales of farmland and look into financing new farmers to enable them to start up farms and successfully manage them. Also regulatory bodies should be set up to determine the price of farmland and produce. The government can also look into buying back farms and leasing them out to capable farmers who lack the financial capacity to buy the farms.

Whatever means the government of Canada employs, it should use a consultative approach, engaging the farmers and stakeholders so that the move does not face rebellion. The future of Canada’s farmland is bright. But there really cant be any success without working together.Anyone who has gone through the road of success will agree that unity is what makes the difference between failure and success.If the stalkholders work together,the vast fertile land and ready market for produce will forever allow the industry to prosper. It is however crucial to ensure that the boon does not turn into a curse due to greed and lack of order. Supporting the Canadian farming industry is an investment in the country’s future not just in this sector, but every facet of the country’s economy.

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