Where are Alberta land prices going?

[AlbertaFarmer5]

Is anyone else's crystal ball working better than mine? I can't see what would continue to drive AB land prices up now that the oilman, the cattleman, and the grain farmer are running out of enthusiasm. In my area most land is bought with energy industry money, rather than farming, and that has dried up. Cattle guys just barely got a chance to start thinking about expanding when the wheels fell off cattle prices.
Banks are getting stricter. City folks who bought a lot of land around here all have or had energy industry jobs. US values are going down. Canadian and Albertan political climate is anti investment, anti business, to be polite.

But, CAD is dropping, interest rates are still and likely to continue to be record low. Values still went up considerably last year in spite of the energy industry. Still many pundits preaching about inflation. European farmers still moving into the area, prices still nearly free compared to Holland, probably more motivated than ever to leave the economic disaster that has become the EU.

I believe there will be better opportunities in coming years, but I've been hearing how land is so overpriced that it just has to drop for my entire adult life and then some. Everything that I have ever bought has been far too expensive at the time. But in hindsight, they all look brilliant. Can't be true forever though.

Anyone seeing any recent trends either way?

[farmaholic]

.....try to remember the early 80's!!!!!!!!

[4GFarms]

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.

[farmaholic]

How many people do you know who buys a quarter or two of dirt and pays for it without subsidizing it with other income?

[4GFarms]

Thats my point farma! I do not have any outside income or investment so the values just do not compute for me!! I guess you could just buy and pay interest and then hope it increases and sell in x number of years but thats not on my agenda. I want land to farm like a normal farmer.

[Ache4Acres]

As long as interest rates stay low and are moving even lower land prices will be High and going higher

[farmaholic]

Thats my point farma! I do not have any outside income or investment so the values just do not compute for me!! I guess you could just buy and pay interest and then hope it increases and sell in x number of years but thats not on my agenda. I want land to farm like a normal farmer.

You either needed deep pockets or paid for land to subsidize it because it wasn't the economics of grain farming it that drove land prices this last run up.

[AlbertaFarmer5]

As long as interest rates stay low and are moving even lower land prices will be High and going higher

Judging by your name, I suspect you might be just a little bit biased? Why are US values already dropping with low interest rates?

[grassfarmer]

Everything that I have ever bought has been far too expensive at the time. But in hindsight, they all look brilliant. Can't be true forever though.

Don't know - it's been that way for a long time. OK so there was a setback here in the 80's but just like the stockmarket it was a blip on the line of upward movement.

I do not understand what anyone grows on their land to justify the cost of it.... 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 guess you could just buy and pay interest and then hope it increases and sell in x number of years but thats not on my agenda. I want land to farm like a normal farmer.

I'm starting to think that is wrong headed thinking - why do you have to pay off the capital asset with the production off it? - you've got the asset and its appreciating. I know it was possible in the 1950s through to the late 1970s in Europe to pay off land purchase with the production - my Dad did it and his rule was you had to be able to pay it off in 7 years or you didn't buy it. Looking back over history I think that time period of fairly good farm profitability relative to land price was an anomaly.
With land prices where they are now maybe we should consider it two profit centres - ownership of the land and farming of the land?

[4GFarms]

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.

[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!