Farm Credit Canada : Fall 2005 Farmland Values

(Comments refer to information gathered between January 1 and June 30, 2005.)

Welcome to Farm Credit Canada's fall 2005 Farmland Values Report. Farm Credit Canada (FCC) is the leading business and financial services provider to argriculture in Canada.

Introduction

As Canada’s leading business and financial services provider to agriculture, FCC understands the value of solid market knowledge when making management decisions. That’s why twice a year FCC compiles and releases the Farmland Values Report. It highlights changes in land values in each province and nationally. Each year a report is released in the spring. It describes changes from July 1 until December 31. A second report is released in the fall and identifies changes from January 1 until June 30. Each report contains 10 years of trend information within an attached graph.

Methodology

In 1985, FCC established a system of 245 benchmark farm properties to monitor variations in bareland values across Canada. Since 1990, benchmark properties have been appraised semi-annually in January and July. These selected parcels represent the most prevalent classes of agricultural soil in each census district. The benchmark properties are zoned for agriculture and represent current land use. Weighting is assigned to each property and to each province, based on the improved farmland area recorded by the 1996 Census of Agriculture.

FCC appraisers estimate market value using recent comparable sales. These sales must be arm's length transactions. Once sales are selected, they are reviewed, analyzed and adjusted to benchmark properties. Individual values are reconciled before accredited appraisers review the appraisal reports.

National Trend

The value of farmland across Canada increased 1.6 per cent during the first six months of 2005. This is a slight decrease from the 2.2 per cent noted in the last six months of 2004.

The increase is on par with the upward trend that has continued since January 2000. Rising land values generally indicate strength in the agriculture industry.

The largest increase in farmland values is in British Columbia where values grew 6.5 per cent. Alberta follows at 3.2 per cent.

Nova Scotia values show an increase of 0.4 per cent.

Values in Saskatchewan, Quebec and Nova Scotia show an increase although below the national average.

Ontario and Manitoba show an increase similar to the national average at 1.8 per cent and 1.6 per cent respectively. There is no increase or decrease in Prince Edward Island, Newfoundland and Labrador.

Canda Semi-annual increase in farmland values
July 2002 – Jan. 2003		2.6%
Jan. 2003 – July 2003		2.3%
July 2003 – Jan. 2004		1.5%
Jan. 2004 – July 2004		2.3%
July 2004 – Jan. 2005		2.2%
Jan. 2005 – July 2005		1.6%

British Columbia

The B.C. farmland market shows the biggest increase in Canada at 6.5 per cent. Farmland values have shown a positive trend over the last seven periods, with the largest increase in the last six months. The B.C. market has a number of distinct markets with unique factors affecting each area.

Land values continue to increase in the lower mainland on a broad base due to optimism fueled by high demand for properties and anticipation of continued demand for real estate.

On Vancouver Island, the continued migration of retirees into this area has pressured the market for residential development driving up the cost of land suitable for any purpose. Although agricultural land remains protected, the rising cost of other land carries over to agriculture.

Areas of the Okanagan Valley suitable for orchard and vineyards are increasing in value as buyers from outside the area appear to be adding competition to the market.

Areas of the B.C. Interior involving woodlot, forestry and livestock production are showing less optimism with generally stable prices.

In the B.C. Peace River area farmland values have been mostly stable with continued increases closer to town due to urban influence and significant income from the resource sector.