Huron County leads swift rise in southwestern Ontario farmland values

Shifting interest rates and commodity prices are fuelling a swift rise in values for southwestern Ontario's farmland, especially in Huron County, where land values increased 24 per cent in 2023, according to a new report from a group that appraises real estate.

The rise in Huron County is just the most striking example of a larger trend. The cost of farmland rose 10 per cent across southwestern Ontario, bringing it to new heights, with the cost per acre nearing $40,000 in some counties.

"We're talking about major jumps in land values," Ryan Parker, who wrote the report on behalf of Valco Consultants Inc., said on CBC's Afternoon Drive. 

"In 2021 and 2022, we saw [overall] rises of 25 per cent, and last year 10 per cent."

Across southwestern Ontario's 11 counties, the median cost of an acre of land rose from approximately $15,000 per acre in 2020 to over $25,000 in 2023, with the most significant increase between 2021 and 2022, according to the report.

The counties with the highest cost of land are Perth and Oxford, which both saw median values of over $35,000 per acre.

"Higher interest rates definitely have had an impact. Depending on the exact time frame you take, these rates pretty much tripled during the pandemic," said Parker.

On the other side of the coin, Parker said, commodity prices increasing over the course of the pandemic were a large driver of increasing values, allowing farmers excess cash to buy more land.

Over 2023, however, the prices of commodities like corn levelled off, cooling down the rate of increase, but not entirely halting it.

"Ten per cent in one year is still up," Parker said.

Dave Boonstoppel, a land broker in Huron County, believes an important factor in land values increasing has to do with a demographic change. (Dave Boonstoppel)

In Huron County, where the median cost per acre of farmland jumped from just below $25,000 to roughly $30,000 in 2023, real estate brokers are noticing demographic trends driving increasing land value as well.

"Farms are being transitioned to the younger generation, and to keep things viable, they need to grow. Because of increasing costs, they need to diversify too. Maybe a dairy farm is now doing cash crops," said Dave Boonstoppel, a broker who deals in residential and agricultural land in Huron County.

The county's land values quickly caught up with that of more sought-after counties in 2023, with a 24 per cent increase — one Boonstoppel called shocking.

With low supply and high demand driven by the desire for expansion, farmers are being forced to act quickly for the land they need, he added.

"If the neighbour's farm is for sale, you usually get one chance to buy it and that's usually the one you're going to buy."

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What's driving interest in Huron County specifically is a harder question to answer, he said, but he believes the quality of the land and the high concentration of livestock farms there top the list of potential reasons.

Looking to 2024, Boonstoppel expects to see the swift rise in values to level off.

"If we see some interest rate movement in the downward direction, which is what everybody is anticipating, I see that it's going to continue to be strong and and increase — but not these leaps and bounds that it did in the last number of years."

From Parker's perspective, variability is likely to be the word of the year for 2024.

"I think we're gonna have a big spread in a lot of areas," he said.

While he expects new highs in 2024, he said there will likely be more opportunity for smaller and mid-range buyers to engage with the market.