Although long considered a “low risk, low return” asset, Canadian farmland is high demand today…and for good reason. Often, investment in farmland outperforms Canadian stock and bond indices. From 2012 to 2014, Ontario farmland increased in value by an average of 19.2%, according to Farm Credit Canada. In contrast, for that same period, S&P/TSX Composite Total Return index increased 10.2%.
Because farmland is not correlated to the overall stock market and it positively correlates with the rising commodity prices, investors are attracted to the portfolio diversification that investment in agricultural land offers. And you will never see farmland value bottom out completely, unlike the risk with stocks and bonds.
A 2009 report from Hancock Agricultural Investment Group, stated that statistics prove the value of North American farmland is an effective tool for hedging inflation. Because farmland is needed to produce foods, which will always be in demand, it is not highly price sensitive and could deliver great rates of return.
When making an agricultural land investment, be sure to talk to a mortgage broker about agricultural mortgages specifically. They could save you $1,000’s through lower interest rates and flexible payment plans, on an investment that could outperform the stock market year after year.