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

Abstract

AbstractIn the wake of the substantial increases in farmland values that have occurred in Ontario since 2008, concerns have been expressed regarding the potential influence of nonfarmer 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 nonfarmer buyers on sale prices for farmland in Ontario, using a hedonic approach and farmland sales data from 2002 to 2016. Analysis is also conducted to determine whether marginal implicit prices of specific farm attributes differ between farmer buyers and nonfarmer buyers. The results indicate that nonfarmer 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 nonfarmer buyers value more highly attributes related to nonagricultural use. These results imply that the higher prices paid by nonfarmers may be attributable to the bid‐rent theory, as nonfarmers may be bidding more than farmers for farmland in near‐urban areas due to higher expected returns from future urban use of the land.