Higher interest rates cool rise in Ontario farmland prices

Ontario farmland prices rose again last year, continuing a decade of growing value, although well below the double-digit annual percentage increases for land of a few years ago.A Farm Credit Canada report released Monday said prices in Ontario rose by 3.6 per cent on average in 2018, well below the national average of 6.6 per cent.In Southwestern Ontario, the increase last year was even smaller, with the price of farmland rising by an average of 2.4 per cent to $12,435 an acre.One of the key factors limiting the rise in land prices has been increases in the cost of borrowing, Farm Credit Canada said. J.P. Gervais, Farm Credit’s chief economist, said there have been five Bank of Canada interest rate increases since 2017.Gervais downplayed the shrinking rate of increase for farmland in Ontario, noting the increase in value of Ontario land outpaced the national average in 2017 and land values in Ontario remain among the highest in the country.“I wouldn’t make too much of a point (of Ontario) being somewhat on the lower end of the range of estimates that we find,” he said.“At the end of the day, it is still a sizeable increase when you convert some of the smaller percentages in terms of dollars per acre.”Despite increases in the cost of borrowing, the growth in Ontario farmland value is mainly the result of demand exceeding the available supply, Gervais said.With supply expected to remain limited, Gervais said Farm Credit Canada expects to see farmland prices rise again this year.Nationally, average farmland values rose in all provinces except Nova Scotia.The highest average increase was in Quebec, where farmland values rose by 8.3 per cent.BY THE NUMBERSAverage annual change in farmland values in 2018 (2017)Canada: 6.6 per cent (8.4)Ontario: 3.6 per cent (9.4)Southwestern Ontario: 2.4 (4.2)AVERAGE ONTARIO INCREASES2012: 30.1 per cent2013: 15.9 per cent2014: 12.4 per cent2015: 6.6 per cent2016: 4.4 per cent2017: 9.4 per cent2018: 3.6 per [email protected]/JuhaatLFPress

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