Farmland values skyrocketing in southern Ontario
Underneath all the snow we've seen is a goldmine, considering the skyrocketing price of farmland.
Rural Ontario is going through an unprecedented boom because land prices in parts of southern Ontario have doubled.
"It's been pretty amazing to watch. Farms sell and everyone you go to brings more than the last one," says Steve Balfour, a Perth County farmer.
Since 2010, the price of land in Bruce County has risen 37.5 per cent a year, in Lambton County it's up 36.7 per cent while Elgin and Huron County have seen smaller annual increases closer to 27 per cent.
That means the price of an acre of land in most of southern and midwestern Ontario has doubled in three short years.
"We've seen an increase of anywhere from $8,000 to $10,000 an acre, which is pretty substantial in a short time," says Howard Culligan of Culligan Realty in Mitchell.
Land in Middlesex County has risen from an average of $6,000 an acre in 2010, to an average of $11,000 now and $9,000 an acre in Perth to $16,000. There are similar increases in Oxford and Huron County.
The increases have been largely fuelled by record high commodity prices and record low borrowing costs.
But with corn and soybean prices coming down this year, it begs the question...when the will the bubble burst?
"Is it sustainable? Yes. The land prices here I think, are here to stay," says Culligan.
But this past year, the drastic annual increases slowed a bit in some regions, with only six per cent increases in Middlesex.
Land prices are a boon for those exiting the industry, the opposite feeling for those trying to buy in.
"The farms are going to get larger. So if you're not part of a family farm, growing into it, or some kind of corporate investment. It's going to be a struggle to raise enough financing to buy land at this price," says Balfour.
The $1 million or more price tag for 100 acres of land in most of southern Ontario has reportedly prompted rumoured Chinese investors to look elsewhere in Canada.
Culligan believes interest rates alone will be the reason southern Ontario land prices level off or not in the foreseeable future.
"If the cost of money goes from three per cent, four per cent to six per cent, seven per cent - a lot of farmers are going to tell you six per cent, seven per cent doesn't seem like a lot of money, but it is when you're talking the borrowing those kinds of dollars," says Culligan.