Vancouver Real Estate Cracking . . . .

[sumdumguy]

Land never looks cheap. In 1972 we were warned that there was no way in hell we would pay off $125/acre land, then in 1980 we paid $750/ acre and it took us a few lentil crops to pay that off but its value fell to the $350 range. Guess it just depends how determined you and your wifey are. Might have to work in a chicken plucking plant to pay her off but whatever.

[farmaholic]

....the only chicken that will be plucked is the guy buying the land. Just kidding, we could swing it but I think we are in the same place we were at the mid eighties early nineties again.... like you explained sumdumguy... $750 down to $350(was it really that bad?) and twenty years later back up to $750 and like Buzz Lightyear would say "to infinity and beyond" since then....ah, I don't think so!

Everyone wearing a parachute? The heavier you are the bigger it needs to be(iceman?).

[tubs]

buying land here is becoming a pipedream our hutterite neighbours are buying everything I feel bad for young people that want to get in the game I BELEIVE THE TIMING IS WRONG. It is alright if you can subsidice with other land. It is not just land see what machinery prices have done in the last few years.

[Farmfleury]

Furrow,
I did not say you could get a 25 year loan for 3.5% but said you can float a loan for 3.5% easy.
It might be 2.5% next year or 9% that is definitely the risk.
I agree it seems land prices are out of control, but since I started farming in 1991 land values have done nothing but increase and interest rates decrease. Everytime I bought land it seemed almost impossible to make it work. Land values of 265$/acre dryland when I started farming to the last quarter of irrigation of over 1mill/quarter.

[AlbertaFarmer5]

I've been trying to imagine what scenario will significantly drop land prices in my area. Most land here is bought with oil money, not ag, but during this downturn, virtually nothing has sold, or come on the market. I tried to buy some land from an estate sale last fall, my offers were well below market value, and they were no sales, except a piece with gravel. Not aware of any other land for sale at any price.

Everyone wants to live here, mountain view, trees, creeks, close to recreation areas. Lots of spill over from Calgary. Lots of oil money, both locally and from the cities. most farmers have oil income, and or lease revenue. European farmers still think this land is dirt cheap and keep moving in. Farmers seem to have money to spare. Interest is so cheap as to be irrelevant. I've got mortgages locked in for well under 3%. Lots of development potential. We have one neighbor who moved here 20 years ago specifically because he had established that this was the safest place to be in regards to climate change, etc. The land here has its challenges, but that is almost irrelevant to its value, the potential to ride a quad or horse is more important.



I've been in the camp that land values are unsustainable for a few year now, and therefore they will correct, and obviously, I've been wrong. Quit buying 5 years ago, and the last piece I bought was from a farmer who was selling because he was convinced the price had peaked and would never be that high again in his lifetime.

Here oil goes down, land goes up, cattle go down, land goes up, grain has a disaster, land goes up. What combination of events will it take to see a significant correction?

[sumdumguy]

We lived through 22% interest with 25% on operating loans. Seems unreal when I think back but in 1972 interest rates were 7.5% on our first land. Thought that was horrible until we saw 22% by 1980. We got those lentils in the bin no matter what and how. The droughts of the 80's were lots of fun too. Lucky if you sold out and bought a lifetime annuity. Oldies in debt remember the feeling of banks calling loans for no good reason but to grab your equity. Taught us lots of lessons.

[newguy]

remember a formula that made the most sense on whether to buy or rent land.If your payments are less than 2 times what cash rent is than buy.if it is over 3 times rent.if it is between 2 and 3 than it could go either way depending on your individual situation.If your waiting for land to go back down to 10 years ago prices not happen.just too much money out there that will hold up the bottom price that was not there in the 80s.

[highwayman]

According to FCC, the ratio of crop receipts to land values has remained quite consistent over a period of many years specifically in Saskatchewan. It is their opinion that land values have plateaued and will trade mostly sideways in most areas in the foreseeable future. Quite possible that we have moved to an environment where land at current and future purchase values have become an exercise of securing an asset that will be paid for over a longer period by more than a single generation as it has in other areas of the world. Not suggesting right or wrong. Most areas it is local farmers driving up values as the ROI doesn't attract investment company participation.

[farmaholic]

To me there is a huge difference between someone looking for a place to park afew million dollars and someone buying and paying for it with yet to be earned money. I would agree to a degree that some grain producers may be contributing to the rise but I do beleive it has been mainly driven by non farming investors.

If the investor is happy with a 3% ROI.....how much money(what%)does a producer have to generate to pay for that same land that the investor just paid cash for? To me, you can hardly compare the two scenarios. Who has the higher risk?

I have a cousin who's son-in-law(doesn't farm and won't be) is looking for a quarter of land to buy....then rent it back to his brother-in-law (my cousin's son). WTF is wrong with that picture....the guy who wants to farm it can't afford to buy it but the guy who doesn't want to farm it can. I guess it is what it is..... . Too many young farmer guys who want to own land are getting shut out. I really do sympathize with them...as I said, it is what it is!

[Hamloc]

In my area land has increased in price by 50% since I bought a quarter that has lost 15 acres to water in the last 4 years. Payments per cultivated acre are 260 per acre on 20 year loan. Looks to me like your land is much more affordable. Over 600000 a quarter here and still rising. Prob 650 is more realistic.

[farmaholic]

....sumdumguy's cocky expensive land buyer!

[farmaholic]

Hamloc, do you farm in the Utopian Fertile Crescent, the Golden Horseshoe of farmland? That must be subsidized with something else(is it legal?) What was the initial purchase price? Land has risen here as well but obviously not to those levels.

Remember when I described my anomalistic crop of 2016 as possibly being other people's norm....that might explain the differences! ;-)

[hobbyfrmr]

A $300K quarter with 25% down at 5% interest is about $75/ac(based on 150 acres) interest only.

Borrow $225K @ 5% over 15 years
Two semi annual payments totaling $21,500 = about $145/ac over 150 acres

Total interest: $97,500

Total Loan paid: $322,500
Plus Down Payment: $75,000
Total cost to buy $300K quarter: $397,500


And you better be young, because if this thing corrects like it did in the mid eighties..... You may not have enough time for the price to recover what you "invested" in it if you want out or have no one else to pass the "asset" on to! If it needs to be "subsidized" with paid-for land, how good of an investment is it?

Everyone looks at things a little different and their view depends on individual circumstances. Plug what ever numbers you want into your loan calculator.



I guess the guys farming the land have been relegated to tenant farmers, the very thing our forefathers left Europe for to come to Canada, the opportunity to own what they farm.

You have to consider that some farms are highly productive and efficient which means profitable. My neighbors pay big rents and purchase prices. They have built big farms and they know what it takes to build wealth every year. When they pay more than I want to , it just shows they are better farmers and more productive than my farm. If I dont like it, I just have to write a bigger cheque to get the land I desire.

[farmaholic]

Hobby, once the critical mass is established it's not that hard....it doesn't have to make economic sense on its own! Well managed farms.....blah blah blah!

[Hamloc]

Farmaholic, just central Alberta. Original price 400 with nothing down. Ponoka area probably closer to 800000. Land prices are indeed crazy.