Where are Alberta land prices going?

[ajl]

You summed up the situation well. The fundamentals are all pointing downwards but the government is firmly committed to trashing the value of the currency as they are all of the lower currency to boost exports mentality. To get perspective if you sold land 3 yrs ago for $USD you would be ahead today. I think you need to have $USD on hand because $CDN will be like pesos in 20 yrs as no serious business will use $CDN. Can't use it to purchase new equipment today any more. All the pundits predicting the crash of the $USD have been wrong as it still is the reserve currency by default since there is nothing to replace it now are in the near future. There is a lot of real estate for sale around here but a lot of it has buildings that are depreciating not the land so much yet. One factor is that if debt in a currency gets so high it eventually pushes that currency higher because of short covering which is one thing pushing Usdx right now. Could happen here too despite government effort to trash it because Canada is one of the greatest debtor nations (public and private) in the world.

[AlbertaFarmer5]

I kinda see your point but still cant wrap my head around it. Somebody (me) would still have to make $150+/acre land payments per year to pay for that appreciated asset.

4G, this is how I justified the last one, and I realize that these factors may be unique to this area.
$2470 per acre, which shocked not only the neighbors, but myself too.

Full quarter with guaranteed one out subdivision potential, if I ever sell that, it lowers my per acre cost to $1595 per acre.

Locked in interest at the time 3.18% Even lower now. $50.70 per acre interest cost, about equivalent to rent in this area. Or $78.50 over the entire purchase price to account for opportunity cost on that capital.

I immediately renegotiated some very out of date oil surface leases. Works out to $81 per acre spread out of the entire quarter. More than pays for the interest. And land taxes with some left over for the principal.

Production only has to pay for the remainder of the principal.Which works out to about the same as rent in this area. And I have something to show for it in the end. Now throw in a significant down payment and take out the acreage and it almost cash flows without any production.

I know interest rates could rise, oil companies could go bankrupt, land values could drop, ban could decide they no longer like me etc.

[AlbertaFarmer5]

I do not understand what anyone grows on their land to justify the cost of it. Too much variables in farming to extend out for the dollar values that are around now. For our farm anyways. Will keep watching and see if there is a correction. I know some of you do not want to see that if you are on the way to selling but I would be more in the buying mood so want lower prices for land. I would like someone to put up an example of how you pay for the land with the crop grown of that land. Without the outside income or investment. Just farming to pay for the land.

I've been on the sidelines for a while too waiting for the inevitable correction. I have no doubt that things have to correct, but if I'd always waited for a correction, I still wouldn't own any land, as there has not been one since I was old enough to buy land. Predicting where the price will go is easy, when it will get there, not so much.

[nicolaas]

young guys, buy if you have a remote chance of it pencilling. Scrimp and save if you have too. Gone are the days when you can pay off a quarter in 1-2 years. Land will not be getting cheaper. The late 80's and nineties will not happen again. If the average joe makes 100 G's /year in patch doing mindless work, Land is worth 3-4 years salary I think? You are competing against city folk and developers.

[4GFarms]

AF5, your situation is unique for sure. That is good that you have your ducks in a row. Although tou missed my point. Not every 1/4 has a sub division potential or lease revenue. Come out here for $1500-2000/acre with nothing but the farmland. I get it, keep buying because it always goes up but you have to pay the piper along the way. Probably would be gone if I had crop out on high priced land. To each their own I guess. Just wanted to see how farmers pay for land by just farming it!

[nicolaas]

NO body can pay for land by just farming it. You have to use the rest of your land to subsidize, or have an off farm job, or have a rich dad. Land has always been too much. The exception was the 80's and 90's, but then try paying off land at 8-10% interest. Money is free right now. The price takes that into account. Do not waste your life speculating on land going down. You will only get bitter. If you want to farm, then buy. You are not getting any younger. Spread the pain out, buy land every 4-5 years, then you can say you hit the low. Some people pay 100 dollar rent. Now that is truly scary.

[blackpowder]

I am only 52 yrs old. But the single biggest mistake of my career (after choice of spouse), was not buying 'expensive' land.
Dad wouldnt leverage any of his equity. It wasnt all paid for from the '68 mortgage. Too afraid to borrow for $700 land with $.96 cent barley in our minds. No skills to pencil anything, let alone our way out.
So, land was $100 in 72. $1000 in 80. $500 in 88. $1000 in 03. $4500 today.
At no time in my career did land ever pay for "itself".
When I look at the operations that did it 'right' in the last 20 years, I see a lot of leveraged equity for sure, but I see a lot of cash too. Multiple income streams (read off farm business).Dont forget grampa and dad wouldve both funded life insurance. ( Mine had none).
In my area. I would predict land to hold. Until interest rates go up.
To get to half. We need over double rates for extended time with an oversupply of land from nonfarming heirs trying to sell.

[GDR]

That's a terrific canola yield, but get your pencil going and figure out how feed barley will work for you this year. You may have other cropping options but lots don't. We have $4500 land here but are limited to cnl, barley, cps and hay. Land is way too high but don't see it going down anytime soon, still lots of money floating around.

[mcfarms]

I had put a post in here talking about new land we had bought and its return this year and how buying land always has seemed too expensive but in hindsight it really never has been. I decided to delete it because it may have come off as boastful and didn't want that. My thought is yes for new entrants to AG straight farming is but always has been tough for the last 100 years, for existing operations all I really know is according to a lot of studies 80-90 percent of millionaire have done it through real estate. Of course I think my one family member who has been buying properties in Ontario for the last 20 years and now spends 6 months a year in his gorgeous house in Florida probably did it smarter than me .

[MBgrower]

Never remenber anyone regretting buying land. Always seems overpriced atbthe time, but looking back u regret not buying more. Easy decision for big farms to pick up a few quarters and let the rest of the business subsidize it for a few years. 30 years later, u are a multi millionare, lots of equity, and little cash rent to pay. The goal of farming should be buying land, and minimizing operational costs, ie machinery which has devastating depreciation rates.