Is this a good time to sell farmland? If so, how can it be a good time to buy farmland?
This is a question I get all the time. Is it a good time to sell? Or is it a good time to buy farmland? I always say it depends. Selling or buying land is a decision that is based on one’s personal and business plans. Do you live in the short-term or long-term?
As we discussed farmland value correlates with farm revenues and farm productivity. In the short term, there is no doubt there are some headwinds that exist for farmland values. Trade wars and tariffs have increased the uncertainty of farm revenues. If one believes that it is a short-term issue, then the impact on farm revenues in any calculation of farmland values would be negligible. If one believes that this will continue in the long run, then farmland valuations could be negatively affected. Regardless, the uncertainty as to its impact has certainly increased the discount rate used to assess the value of farmland providing downward pressure on land values.
The offset to trade barriers and tariffs is the impact of cannabis on land values. Recently, there is an interest in farmland for the purpose of cultivating cannabis. The degree to which this will increase farmland values has not been fully explored. Doing a google search regarding “the impact of cannabis on farmland values” does not provide any research of any significance. However, my experience has indicated that investors in the cannabis industry seem to be well funded. Therefore, I believe it will have a positive impact on land values going forward.
So, is it a good time to sell farmland? In the short-term, one could say that it is an excellent time to sell. According to FCC’s Farmland Values Report, the average value of Saskatchewan farmland increased by 7.4 per cent in 2018, down from the 10.2 per cent increase in 2017. If you are personally at a point in your life that you are looking to lower your risk exposure, there has undoubtedly been an increase in the risk associated with farmland values in the short-term.
Is it a good time to buy farmland? If you have a long-term outlook on farmland, I believe it is a good time to buy. The impact of cannabis on Canadian farmland in the long-term should be positive. The fact that new investors into the pool of farmland acquirers can only increase the value of land, from my perspective. In the very long-term, trade barriers and tariffs are unlikely to remain.
While I recognize that this may not have answered all your question specifically regarding buying or selling land, I would be pleased to meet with you to discuss your specific situation and provide greater clarity to the issue.