Already Canada's priciest, Ontario farmland could hit new record values, analysts say

Ontario farmland is set to hit to an average price of $30,000 an acre, doubling its value in a little over a decade, due to tight inventory and high commodity prices driven by global instability and historically low interest rates, according to analysts who watch agricultural real estate closely. 

Already considered the most valuable in Canada, Ontario's farmland has come under intense public scrutiny since the uproar over the Greenbelt land swap. The plan would have seen 50,000 homes built on ecologically protected farmland, until public outrage and an RCMP probe forced the province to reverse its decision. 

The controversy has added fuel to an already simmering debate over how much protection farmland in Ontario should get against ever-growing urban boundaries, as cities push outwards under the strain of immigration-fuelled population growth. 

What's driving the rise in the value of farmland over the last decade, however, isn't necessarily encroaching urban development, according to Ryan Parker, a partner in the agriculture division at Valco Consultants in London, Ont.

The farmland appraiser believes the rise has been driven mostly by farmers themselves, leveraging the value of their land to expand operations. 

"With that ability to be able to expand, that ability to be able to leverage and to be looked fondly on by the lending institutions, farmers have been aggressively expanding, and really, that's what's created a lot of the increase in value on farmland in Ontario." 

Each year, Parker publishes a study on the value of farmland across 11 counties that represent a large swathe of Ontario's heartland, from the southern shore of Georgian Bay to the north shore of Lake Erie. 

"Last year in those 11 counties, our median price was around $23,000 a workable acre," he said. He noted that while this year's study isn't complete, he believes values will be "up significantly again" in 2023, to the tune of about 25 per cent for the third consecutive year.

"We're going to be getting awfully close to an average value of $30,000 a workable acre," he said. "The demand for farmland over the last 10 to 15 years has been significant." 

The trend isn't unique to Ontario, according to Justin Shepherd, a senior economist with Farm Credit Canada.

"All areas of Canada have seen farmland value increases over the last little while," he said, noting Ontario led the country for farmland value growth in 2022 at 19.4 per cent for the calendar year. 

The most expensive farmland in Canada now lies in southwestern Ontario, according to Shepherd, where farms that once went for an average of $15,000 an acre a decade ago between the Windsor and London areas fetched an average value of $28,900 in 2022.

"In the southwest, there's producers demanding land, especially in the short term. We haven't seen a huge amount of land come up for sale," he said. He noted the region's climate, soil quality and scarcity of available land all work to reinforce the land's value, despite recent hikes in interest rates from the Bank of Canada. 

"I think that's what 2023 has really shown, is that we've seen farmland sales down across the country, and that's helped support price appreciation even when we're seeing higher interest rates and maybe some bit of a general slowdown in the economy."