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Farmland values soar

Development drives up prices in Saskatoon area

Paulson, J 2009 “Farmland values soar”, The StarPhoenix 4 June

 

A quarter section of land in the RM of Aberdeen recently sold for more than $2 million, or $13,000 per acre.

Jed Kadoura, president of Blue Unicorn Investments Ltd. Sask., sold the quarter section in April to a businessperson from Edmonton, who subsequently turned it over in a share purchase.

Kadoura, a Calgary-based land developer, still owns about 4,000 acres in the Aberdeen area, having purchased the land in early 2007. He has subdivided some of the land into 40-acre parcels, which will soon be served by a new water line and a new road.

Near Calgary, developers are looking at spending $30,000 an acre; Kadoura paid $5.3 million for one quarter section near the Alberta city. Compared to those numbers, Saskatchewan land is still inexpensive, he says.

"That's the place to be," said Kadoura. "People go where they can make money. Saskatchewan has the cheapest land across Canada. Where can you buy beautiful land for $3,000, $4,000, $5,000 per acre? Nowhere.

"It's still dirt cheap and it's going to go up."

Farmland values in general have increased about 24 per cent in the last 18 months, the fastest-rising rate in Canada. Still, land remains less expensive than in the neighbouring provinces.

"We are way underpriced compared to Alberta," says Bill Brown, agricultural economist at the University of Saskatchewan and a land expert.

Before prices started to rise, land was an average of $340 an acre compared to Alberta's $800. Even Manitoba's average value, at $600, beats today's Saskatchewan average of $400 to $500.

But land values within a 30- to 40-kilometre radius of Saskatoon or Regina are a different story. The three most influential factors affecting real estate are location, location, location -- and farmland is no different, noted Brown.

"Around the bigger cities there is land speculation going on," said Brown.

"Any direction you go from Saskatoon there are acreage developments. It's still cheaper than outside Calgary or Edmonton."

Amber Ray, administrator with Farm Credit Canada, has also noticed a lot of speculators around city centres. In many cases, she said, they hope the city will grow out to their land.

In general, farmland varies in price depending on soil type and crop return; but that changes closer to a city, particularly since Saskatchewan hit a couple of boom years.

"If you're five minutes away from Saskatoon it's not going to be the same value," said Ray.

The RM of Aberdeen just east of Saskatoon is one area seeing quite a lot of development. Rosetta Developments is building a $1.8-million mall in the town of Aberdeen, as well as homes. A subdivision, Cherry Hills, has almost sold out its first phase.

Don Fry, a real estate agent and property developer, says the new acreage-estate phenomenon is about 21/2 to three years old. He became involved in the Bergheim Estates project, about 5.5 kilometres past the drive-in on Highway 41, at about that time.

"At that time, we paid more for that land than what was the norm. From there, it's just mushroomed."

Phase 1 is well into development and he hopes to bring on Phase 2 in the not-too-distant future.

The RM of Aberdeen is hot right now, but there is also a lot of development going on in Blucher and around Dundurn, says Fry.

"The big push seems to be into that east quadrant (at Aberdeen). My belief is that people buying the upper-end stuff are working at Innovation Place or the University of Saskatchewan.

"That's what's fuelling it. They want to be as close to work as possible without going across our terrible system of bridges."

As to the developers, there is, in general, "tonnes of Alberta money," says Fry. "A lot of people in Saskatchewan are not speculators . . . they want a sure thing."

Fry says some of the properties are not as expensive as people might expect. His company is targeting an all-in price of $350,000 to $450,000. For example, on a 21/2- to six-acre lot with a 1,369-square-foot bungalow, a buyer may expect to pay $399,000 to $409,000.

"We have a builder, we have everything in place. We can target that number."

The RM, meanwhile, is trying to control the rapid pace of growth. Garbage management, road building and maintenance, firefighting and other services -- including an incoming new waterline -- must be planned for and provided, says administrator Gary Dziadyk.

"We only allow 160 acres at a time (under) development, and there are 23 lots on that 160 acres," he said. These properties are referred to as "country residentials."

"Anything more than that, we won't allow it, because it doesn't fit with our zoning bylaw."

For now, "the market is probably saturated," he added. "We have probably have, right now, 200 parcels that haven't been built on yet. They're averaging anything from $140,000 to $180,000 per (five-acre) parcel; some have sold for $220,000."

Some farmers are unhappy about the development. The land is too expensive to farm and farmers cannot go into small parcels because of the size of their machinery, said Dziadyk. On the other hand, retiring farmers can sell their land for much more than they likely expected a few years ago.

There is still a lot of interest, said Dziadyk. People from Calgary and British Columbia have come in to buy land, but he has also had calls from Ireland and India. He has been wearing a lot of different hats lately -- including host to buyer delegations.

"Last year was an interesting year, I'll tell you."

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