BC farmland values continue to post strong growth, according to Farm Credit Canada, rising faster than anywhere else in Western Canada in the 12 months ended June.
Strong transaction activity led values 15% higher during the period, with much of the increase logged in the latter half of 2021 before interest rates began rocketing upwards.
During the first half of 2022, values in BC increased just 6.5%, below the national average of 8.1%.
“Producers are still making strategic investments in their operations and buying farmland, which is in short supply and high demand,” says FCC’s chief economist J.P. Gervais regarding the report.
Most land transactions in the first half of the year closed prior to the most significant interest rate increases that began in March. Higher borrowing rates will dampen deal activity, but Gervais expects producers to continue buying land that makes sense for their operations.
“There’s little doubt that higher borrowing costs will slow the demand for farmland,” he says. “But the fact that the supply of farmland available is limited and farm incomes are trending in the right direction could offset the impact of interest rate increases.”
Coinciding with the interest rate hike on July 7, FCC reported that farm cash receipts nationally could rise 15.9% in 2022. Robust commodity prices and the promise of stronger crop yields than last year buoyed the hopes.
“We are in a unique position where record farm revenues are helping to offset the impact of a sharp increase in input costs and rising interest rates,” Gervais said at the time. “Even if our projections were more modest, the Canadian agriculture industry certainly seems financially healthy and in a good position to weather inflationary pressure and higher interest rates.”
One test of demand is a November 3 auction of seven properties in Abbotsford, Langley and Quesnel listed with BC Farm and Ranch Realty Ltd.. Organized by the Future of Real Estate, a US-based online auction house, it claims to be the biggest farm and ranch auction ever in BC with more than 1,905 acres on offer.
However, the strong growth in land values prior to July 1 will contribute to higher property tax bills for growers in 2023. July 1 is the date at which the BC Assessment Authority values properties for the coming year’s tax roll.