THERE’S an outlier in Canadian real estate that has yet to see a pinch from rising interest rates: farmland.

The average cost of farmland in Canada rose nearly 13 per cent in 2022, the biggest increase since 2014, according to a new report from government-owned agricultural lender Farm Credit Canada. While higher interest rates and pricier fertiliser costs for farmers were expected to hamper land prices and sales, demand was “robust”, the report said.

“We’re not yet seeing the full impact of higher interest rates on the demand for farmland,” said JP Gervais, Farm Credit Canada’s chief economist, noting tight supplies is a big driver of the gains.

Canada’s housing market slowed last year as the central bank embarked on its round of interest rates hikes, pressuring home sales and fuelling a drop in prices. Farmland in Ontario, meanwhile, saw the biggest gains in the country, with prices jumping 19 per cent amid strong demand from large farm operations and investors, Farm Credit Canada said.

Higher borrowing and fertiliser costs are expected to weigh on sales in 2023, though prices will probably rise, just at a slower rate, Gervais said. Strong demand and limited supply of farmland will help the market remain “fairly stable”, he said. BLOOMBERG