Low commodity prices have put the brakes on five years of rising land prices on the Prairies.
In the last six months of 1998, farmland values increased only marginally, according to Farm Credit Corp.
The increase was 0.2 percent in Alberta and Saskatchewan, and 0.7 percent in Manitoba.
“The general trend is that while values are still increasing, we’re losing momentum,” said Roy Hjelte, senior appraiser with FCC’s appraisal unit for Western Canada.
And he warned that prices during the first half of 1999 could actually drop.
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“It’s possible,” he said. “If that trend continues, depending on commodity prices and future events, we could quite realistically be looking at some decreases in values in numerous provinces.”
If that happens, it will be the first decline in any six-month period since 1993 in the three prairie provinces.
British Columbia has already reached that point, registering a 2.9 percent decline in land values in the last six months of 1998, following a 2.5 percent drop during the previous six months.
Appraised twice annually
The land values reported by FCC semi-annually are based on an analysis of 245 benchmark properties across the country. The properties, which represent the most prevalent classes of soil in each census district, are appraised on Jan. 1 and July 1 each year.
The latest survey shows that for Canada as a whole, farmland values increased by 0.5 percent in the six months ended Jan. 1, 1999.
That compares with a 2.3 percent increase during the previous six months. During the previous five years the average semi-annual increase was 4.1 percent.
On the Prairies over the past five years, land values have registered an average semi-annual increase of 4.3 percent in Alberta, 3.9 percent in Saskatchewan and 3.6 percent in Manitoba.
Hjelte cautioned that the FCC figure is an average, which means there could be areas on the Prairies where land values have increased sharply or dropped precipitously, reflecting local conditions and demand. He said sales activity has slowed, particularly in marginal areas.
“Top quality land tends to be in demand in spite of poor times, there is still competition, but when you get to the more marginal land the buyers really drop off.”
Here’s what the FCC had to say about factors affecting land values in the four western provinces:
- Manitoba: Areas with better soils or special enterprises, such as dairy and irrigated potatoes, saw stronger prices. In grain, oilseed and livestock areas, prices were flat. The market is tightening, with sales lagging in many areas of the province.
- Saskatchewan: Weakening commodity prices and rising costs have limited cash flow and created uncertainty among farmers, making them cautious about investment, including land purchases.
- Alberta: Land values are strong in areas of intensive farm operations, such as southern irrigation areas, and in close proximity to urban areas. In central and northern areas, land prices are stable to lower.
- British Columbia – Prices for land suitable for vegetables, berries and orchards have weakened considerably, while low grain prices are hurting values in the north.
