Farmland Market Update: July 1 - December 31, 2023 

Farmland Market Update: July 1 - December 31, 2023 

As we embark on a new year, it's vital to reflect on the recent trends and shifts in the Saskatchewan farmland real estate market. The latter half of 2023 presented an interesting mix of developments, which we believe are crucial for both our farming community and farmland investors to understand. Here's a comprehensive overview of the key observations from July 1 to December 31, 2023. 

1. Strong Post-Harvest Purchasing Activity 

The period immediately following the harvest season witnessed a significant increase in land transactions. Notably, the land values in these transactions surged by up to 10%. This trend was particularly pronounced in regions that enjoyed a decent harvest, boasted high-quality soil (top third in the province), and historically experienced above-average competition for land. This period was marked by more robust commodity prices and an elevated sense of optimism, although these factors have somewhat moderated since then. 

2. An Uptick in Listing Inventory 

After a decade of steadily declining farmland-for-sale inventory - a whopping 75% drop - we're finally witnessing a reversal of this trend. The past twelve months have seen a modest yet encouraging increase in farmland listings. This development is providing a much-needed equilibrium in the market, matching supply with demand. Buyers are now getting opportunities to purchase farmland, albeit at all-time high prices. This influx of available properties is gradually enabling more balanced market conditions, giving buyers some leverage in negotiations and indicating a potential stabilization in land values. 

Chart: MLS Farmland Listings Trend, Past 5 Years (Source: SRA MLS)

The chart included here showcases the gradual increase in farmland listings starting in January 2023.

3. Shift in Investor Sentiment

Farmland has been an exceptional investment over the past two decades, effectively serving as a hedge against inflation. However, we're noticing a shift in investor sentiment. With emerging investment avenues offering attractive returns, such as liquid GICs at 5.0% and Canadian bank stocks with dividends exceeding 4.0%, some investors are considering divesting from farmland. Furthermore, retired farmers who opted to rent out their land in the past decade are now beginning to sell, contributing to the increase in market supply. This shift is gradually aligning the market closer to a demand-supply equilibrium. 

4. Softening Market Depth 

Conversations with producers at the Crop Production Show in Saskatoon shed light on a growing concern: the affordability of farmland. Factors such as falling commodity prices, dwindling profit margins, rising equipment costs, persistent drought conditions, and the lack of significant interest rate relief are dampening buyer optimism. While demand remains strong and prices are holding, the number of buyers competing at these levels is diminishing. For instance, where we saw 10 offers on properties last year, now we're witnessing only 3 or 4 bids. This decline in market depth is a leading indicator of potential shifts in farmland values. 

As we navigate through these evolving market conditions, our commitment to providing you with insightful, accurate, and valuable information remains steadfast. We believe that understanding these trends is crucial for making informed decisions in the dynamic world of farmland real estate.

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