Prices paid for farmland in Ontario: Does buyer type matter?

Abstract

In the wake of the substantial increases in farmland values that have occurred over the past decade in Ontario, concerns have been expressed regarding the potential influence of non-farmer buyers, such as investment companies and foreign buyers, on prices paid for farmland. To examine whether these concerns may be warranted, this paper estimates the impact of non-farmer buyers on sale prices for farmland in Ontario, using a hedonic approach and farmland sales data from 2002-2016. Analysis is also conducted to determine whether marginal implicit prices of specific farm attributes differ between farmer buyers and non-farmer buyers. The results indicate that non-farmer buyers have paid higher prices for farmland, but only in near-urban areas. In addition, differences in marginal implicit prices for farmland attributes are found, where farmer buyers value more highly attributes related to the agricultural productivity of the property while non-farmer buyers value more highly attributes related to non-agricultural use. These results imply that the higher prices paid by non-farmers may be attributable to the bid-rent theory, as non-farmers may be bidding more than farmers for farmland in near-urban areas due to higher expected returns from future urban use of the land.

Publication
Canadian Journal of Agricultural Economics
Max Shang
Max Shang
Research Associate

Research Associate, University of Guelph (Ridgetown Campus)

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