Vancouver Real Estate Cracking . . . .

[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.

[helmsdale]

We were one of the last places to experience "the boom"... Investors found a couple parcels over the last 5-10 years, and there has been no looking back. Prices were static if not declining over a near 20 year period from 1985-2005. Since then, asking prices have appreciated by 375%. Rent so far has stayed slightly more realistic over the same period. It's gone up by maybe 25-50%.

Put another way, when I first graduated from university, I could have bought a 1/4 sec with 8 months of off farm gross wages. That was right at the beginning of the boom. I put in a few above market bids, but was outbid by $150-200 every time by outside money. 11 years later, that has skyrocketed to between 40 and 50 months of off farm gross wages. There is not much point in even throwing bids out anymore.

A few other younger guys are still playing the game betting on ever increasing land values, and ultra low interest rates. The idea is that you only have to suffer through perhaps five years of making payments however you can on a block of land, then releverage the equity appreciation (5 years of payments on a 25 year loan will not gain you much equity) as a down payment on more land. Rinse and repeat every 5 years, hoping for a doubling or more... So long as the banks stay appeased, land values continue rocketing skyward, and interest rates remain at rock bottom, the hope is that you can roll out a multi millionaire by the time you're 40. Good Luck.

[GDR]

Might be different in SK. I'm in central AB like Hamloc. Coffee shop here blames investors and non farmers also but in talking with realtors it's the farm community that has pushed up prices. Lots of generational farms here with deep pockets and young guys to continue. From the non farmer side a 1/4 acre lot in town for 150k makes a 650k quarter look pretty attractive. Interesting thing happened here over the last 10 yrs. Western land with mountain views but less than perfect land was always worth 50% more than good grain land on the east side of highway 2. That good grain land now worth quite a bit more than the west side of hwy 2. So I do think it is ag driven. I would like to buy more and would like to see a correction at my point in life but don't see it happening. It was already mentioned about the Europeans seeing it at cheap but even interior of BC has $20000 per acre plus farmland that is still traded as ag land. I also agree as a going concern as long as you can make your payments value is irrelevant.

[helmsdale]

Multiple avenues for financing now... Investors in our area, and a colony expansion around the inlaws may have been the first to drive prices up, but long established, equity rich operations have sunk themselves to the eyeballs willingly over the last few years.

[MBgrower]

I always use a purchase price per acre / gross revenue per acre ratio to determine feasability. Compare this ratio to past years when you bought land. Did it make sense then? Does it now?

I also agree it is mostly local neighbours bidding up land, not the chinese or foreign investors.

[blackpowder]

I too am not convinced that a shit storm "couldn't happen".
But... I am 30 mins east of camrose and I'm not sure if 650k would get a quarter or not. All local buyers.
What the future holds is anybodys guess. I'm tired of saying 'never' only to be wrong everytime.
It would take a serious longer term problem for rents to fall.
Currently 75 - 125.

Be careful you eastern boys

[hobbyfrmr]

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!

Ok. I didnt understand your comment, I thought you were saying that land prices were too high.