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Discussion Starter #1
Land in my area tripled in price about 10 yrs ago. ( investors/Hutterite’s)
Local farmers said “ridiculous”.
Couple years later they said “reasonable”
5 years later they said “bid higher”
Last few years they say “buy all of it”
This spring they’ll say......?

Maybe land is still cheap
or
maybe it could slide back down as fast as it went up...

what do guys you think?
 

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Around here it’s gone up to high where it doesn’t pencil out to buy unless you have 1/2 the sale price in cash. Rent has come down
 

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They stopped making it thousands of years ago.
All the best bits are in use
More mouths to feed every year.
Cost of production rising
Many cannot afford to buy food full stop. The rest think it should be free so they can spend more on having a good time.
Burecratic crap
Govements wanting more tax to waste on more crap we don't need.
Not many want to work these days
Hell i don't know
 

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At $3000/ acre here they said stupid. At $5000/acre they said stupid. At $10,000/acre they said stupid. At $13000/acre they said I wonder how high it can go... now we've leveled off and backed up to the $9500-11500/acre range for top ground.

Lot of money chasing dirt yet.
 

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The theory round here is you keep averaging out any new land against what you paid previously so as long as grandad only paid £10 it pencils out to pay $4500 now 🤷
 

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My experience is not far from cptusa in Iowa.

In the very depressed agricultural economy of the mid-to-late 1980's, there was some land near us where the financial status of a few farmers got so bad they had to sell, at considerably lower prices than before that time (as in a little less than 50% of former values). The farm economy was so bad it had to be a "steal" before anyone would "stick their neck out."

Other than that "glitch," land prices have only been on the rise, with the philosophical viewpoints that cptusa lists above: basically, for a long time there were proclamations that the price of land was "stupid," yet it seemed someone was always there to pay current rate and, over time, more and then eventually much more.

Even the downturn in prices during the '80's rebounded after several years (only land that had to sell was sold during the down-turn), and not all that long after the re-bound prices went up quite rapidly.

Several months ago Reader's Digest had an article by a mental-health professional in NW Iowa who said that across the last 5 to 6 years net farm income had dropped by about 50%. He wrote about the deep mental stress that he saw in farmers there in the late 1980's, and went on to say that he felt circumstances were getting back to that same range again.

Yet land prices have not backed off all that much (as also noted by cptusa).

In general, over my lifetime, land prices in Iowa have sky-rocketed big time, and it has taken extreme situations to drop prices even in the short-term, and in the long-term nothing in our area has been as secure as dollars invested in land.

While that would tend to say prices will continue going up and up, I think we need to remember the "glitch" of the '80's, add in the much higher rate at which land prices went up not too many years ago, and therefore realize that it all depends on the farm economy: if it stays too low too long, pressures could once again cause some farmers to need to sell at a time when everyone is "scared" to keep paying a very high price.

But, according to the past, the guys who can "hang on" through those poor times tend to come out very good over the long-term (come to think of it, that was true clear back to the Great Depression: Grandpa was able to hang on to his 120 acre farm right next door to his brother, who unfortunately lost his 160 acre farm: they even had the same creditor, but Grandpa was in just good enough financial condition before the depression that by the time he was no longer able to make the payments, no one else had any money either, so the creditor decided he just as well leave grandpa on it than risk someone else).
 

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It’s dropped 25% around me last year. The one investor stopped buying and is in trouble. Rumour is he sold a bunch.
 

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When investors stop buying then you pay attention. Why do investors buy? When there is evidence of generating a return on investment, if no return evident then they don't buy. In that scenario who becomes the buyer to replace the investor. It would have to be farmers who can't justify it on the basis of capital appreciation but purely on what kind of return can be made. And so the farmer himself acts like an investor because if you can't pencil a return on capital either by wealth generation of the productive capacity or by price inflation of the asset then he too exits the market. And we get to the period of the 1990s-2000s where land rented for cost of taxes.
Maybe the US has a better land market. Here in Central Sask that "glitch" of the 80s ran 25 years. And seems to me around 50 years before that farmers had a hard time holding onto land. So two glitches where land did not follow the basic premise of always going up.
In a nutshell, inflation will always drive asset prices up. The only question is can you survive those glitches when the trend reverses severely because price inflation did not match productive capacity of the asset and so buyers exited.
That is what's different this time. Investors have been key players in the price inflation. And investors will do what investors do. Expecting otherwise is a mistake.
 

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That's kind of a tough question. Since the first piece of land that was ever sold up until now, land has basically kept going up, with the few bumps and dips along the way that knocked it down, but it eventually keeps ticking back up. Maybe the bigger question is, will it keep going up in our lifetime? I assume those buying it to sell later on as an investment are thinking it will keep rising. Then there are people like me who in their early 40's can't make a living off the land bought and pay it back in our lifetime, or not pay it back soon enough to sell it and retire off it. (I never plan on selling anyways, it will be passed on to my children or set up for family to farm, either way I won't be alive when it's sold, I hope.) This is where Hutterites and investment firms have a huge advantage, they have generations to make it pay, we have one lifetime. So when you hear of Hutterites saying land isn't worth buying (colony near me said that a few years ago, price has gone up over a thousand an acre since then) that we have to be nearing the tipping point in time where there is a correction. I'm never too worried about what land prices do, way out of my control, but for the investor type, a hiccup can become pretty scary. As the average age of farmers keeps going up, people are looking less at expansion and more towards downsizing or retiring. In my area there are quite a few in that age group, in a few years there will be a good chunk of land for sale in my area, I find it hard to believe that all those acres will be able to be bought up for todays high prices. Throw in a few tough years, and even less likely.
 

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That's a good post Kevlar.
Currency printing is inflation and that drives assets higher. More dollars in circulation means more dollars that can chase the same asset that existed for +100 years. So according to our present monetary system land will always go up over time.

All you need to do now is define that period of time. Are you talking 5 years to plan your next capital machinery purchase, 20 years to know if your kids have a life in farming, or 40 years when you anticipate selling some equity to retire.

So land will always go up. It is baked in the very bones of how our lives are run. The only issue is how you plan and work through those times when land doesn't go up. And for those with the rose colored glasses on - there were most definitely times when land went down. Like lost half its value for 25 years and an entire generation left the farm. Or do we forget.
 

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And the US has gone to a gold standard so what does that do for fiat printing and inflation? Will that stabilize inflation when it becomes public? I keep hearing of a reset
 

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I approach this with the premise that we are likely very close to peak farmland, with peak population not far behind. Barring some unforeseen catastrophe in climate, plant disease, pests or war, we are close to the point where we can feed the total world population( even an increasingly affluent one) on less land every year.

But to go along with such affluence and technology increases, means the population also has more money to spend, and more time to spend. And in many cases a desire to get out of the city. Around here, it only takes a few who choose to spend that money on a piece of ground they can call their own to really affect the land market. I realize the middle of nowhere Sask doesn't have the same appeal as this area, but there will always be spill over. The first thing most of these folks do is reduce or eliminate the productive acres on their new acquisition.

I see the two forces mostly balancing eachother out, especially if the first world continues to attract immigrants ( of the ambitious type), and we don't wholesale sacrifice our economies in the name of global warming or UN wealth redistribution.

There is less than 0.5 of an acre of arable land per person on the planet. Not hard for demand to overwhelm supply, when even a insignificantly small number of people want to own a tiny piece of that. I'll bet all of us have a bigger lawn than that.
 

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Discussion Starter #14
Thanks for the replies guys
Appreciate your opinions.
so If you don’t already own land to use as collateral or you don’t get the golden spoon from the old man.
Do you jump in and start buying now
Or save up money and wait for a downturn.
 

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Land prices tripled in the past 10 years here. Then they dropped 40%. Went to a land auction that didn't get bids on a any lots until the whole unit went for bid. They fought to get it at what I would say was 45% of what it was 3 years earlier. The owner decided to not sell at that price. It was almost back to the price 10 years ago. Will land prices always go up? If they don't, we are struggling. We compete against ourselves more than anything else competes against us. From land prices to organic vs conventional.
 

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At a meeting last week, one presenter said at today’s prices, their farm needs to rent 10 1/4s for everyone 1 they buy to keep costs the same...
That's very true, however if we are in a lower profit driven environment now and those 10 quarters are forced to sell at current levels and only one of those quarters is available to rent it should prove for some tough financial decisions if a guy is used to paying land rent instead of paying a land mortgage. The way I see it buying right now you have to hope your land doubles in value and you get a streak of bumper crops to break even over a 25 year period. Interest is also starting to quietly raise some eyebrows .
Also I am very concerned if our liberal government starts playing around with the capital gains exemption. I think the current level is way to low. Doesn't make sense how the R. Ms can increase property taxes based on higher valued land sales but at the same time our capital gains stays the same. If land does go up and the exemption is not increased you will have a frightening tax bill at retirement if you sell!
 

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Thanks for the replies guys
Appreciate your opinions.
so If you don’t already own land to use as collateral or you don’t get the golden spoon from the old man.
Do you jump in and start buying now
Or save up money and wait for a downturn.
Land always increases in value long term. Short term, it is subject to market forces. Quality land doesn't suffer from the extremes of market forces that poorer quality land does. i.e. Poor land may come off in value by as much as 40-50 % in a downturn, but at the same time quality land may only come back 10-15% before it recovers again.
Look on the positive side. Interest rates are at record lows, so that has to be factored into the equation in terms of total cost of your purchase.
 

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Does land really go up or is it just inflation that is cheating us in thinking it's going up. It would be interesting to chart the land price over the last 500 years in oz of gold but even more interesting i think would be silver as silver has some real world uses and is not just a store of value like gold. Land does not really produce more now than let's say 100 years ago so why should it go up. Does it produce more milk or more potatoes (per ac) and if it does it's the difference in inputs which is just energy in one form or another. In my opinion land is probably a good hedge against inflation as are precious metals with land having the advantage that it can also produce something, that's what I would call a true asset. But it comes with disadvantages too. You can't pack it up and move and the government usually knows this. Why do banks like land as security? because it really is a security, even after a revolution it's still going to be there. For me it's the same but I want to be the sole owner. And that limits what I can buy. And I am ok with that. So if you can pay for it go and buy and don't look at the current market that much. Long term it will be the right decision to buy.
 

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And if land is actually increasing in value, why is it doing so? And why should it continue to always increase? Without inflation I mean. Usually it's because of demand. Like the growth of cities puts pressure on land within a city and land around the city. Where I live is unlikely to see any of that kind of pressure for at least a 100 more years.

Land does not really produce more now than let's say 100 years ago so why should it go up.
I disagree. The green revolution dramatically increased what land produces. My farm produces maybe 10x more per acre than 100 years ago. My grandfather was lucky to get 10 bu/ac rye on our parched ground. Now with irrigation and modern farming practices, it's way more than that, consistently. I think that productivity has been flat for the last couple of decades, though.
 
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