Should farmland be the next target for investors?

Farmland for investors is fraught with challenges, say experts, suggesting buyers – whether Canadian or foreign – need to stick with residential.

A new report from PwC Canada indicates that foreign buyers may be targeting Montreal and Saskatchewan looking for residential real estate, but some may also be looking to purchase farmland, not an opportunity most investors typically look at.

The report said agricultural property around Saskatoon is becoming attractive to foreign investment as the value of that land continues to soar. Several other provinces may also see interest grow as commodity prices for grain, oilseed and other key crops skyrocket.

Currently foreign investment levels in farmland is low – less than one per cent, according to recent research from the University of Guelph – and most of the new purchases are being made by local farmers using proceeds from the commodity boom.

But for investors thinking of dipping their toes into this property market, they should be aware of the growing risks that could slow demand for Canadian farmlands, most notably, say experts, a downswing in commodity prices for everything from oil to agricultural products.

Lower commodity prices could pull the plug on the boom, and actually see land values fall in some areas, experts suggest, a prospect that should keep all but the most hardly of investors firmly devoted to residential property.

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