FARMLAND FREE-FOR-ALL
Harold Steves, a Richmond councillor and farmer, in front of a large home under construction, says that offshore buyers appear to be pushing up farmland prices to build “mega-homes” while reaping tax breaks from minimal food production.
Sales of farmland in B.C. surged and prices jumped immediately after the provincial government announced a foreign buyer tax on residential land in July 2016, a Postmedia investigation shows.
The surge in agricultural land sales and prices — on property that is not subject to the 15 per cent foreign buyer tax — was largely driven by record-setting sales in the Fraser Valley, South Surrey and White Rock.
Data provided by Landcor for Postmedia’s investigation shows that in July 2016 there were 81 farmland sales in B.C., and the average price was $109,000 an acre. The B.C. Liberal government announced the new residential tax on July 25. In August, farm sales jumped to 144 across B.C., and the average price shot up to $140,000 an acre. Prices continued to rise, hitting an average of $151,000 an acre in September on 142 sales. Sales have fallen back to average levels in the following months, but prices have remained elevated.
By looking specifically at where prices and sales have surged, and reviewing anecdotal reports from realtors, a connection can be suggested between the jump in farmland sales after July 2016 and speculation by offshore investors. The B.C. government has been tracking foreign buyers of B.C. farmland since June 2016, but does not “provide the specific number of purchases” because the data sample is not big enough, Ministry of Finance spokesman Jamie Edwardson said.
Postmedia’s investigation suggests that a disturbing trend is accelerating. Farmland that is crucial to B.C.’s future food needs is increasingly falling into the hands of speculators and builders of luxury property, and farmers are getting priced out. Even before the introduction of the residential tax, a Metro Vancouver government investigation identified that 50 per cent of the region’s agricultural land is not being used for farming, and that many property owners are exploiting tax benefits meant for food producers.
The surge in B.C. farmland prices is a Metro Vancouver story. While prices remained fairly stable in other areas of B.C. after July 2016, farm prices were skewed higher by trends in Fraser Valley, South Surrey-White Rock, Richmond and Delta, Postmedia’s analysis shows. In these areas especially, according to realtors and a May 2017 staff report from Richmond city hall, farm prices are no longer attached to agricultural revenue, but instead are following red hot Metro Vancouver residential land prices, and reflect a trend of “estate” building on country acreages.
FEARS CONFIRMED
Postmedia’s findings seem to confirm the fears of Richmond Mayor Malcolm Brodie.
Last year, Brodie said that he expected the new foreign buyer tax to fuel speculation in farmland. On the day the tax was announced in July, Richmond warned the provincial government of its impacts.
“We said, ‘Why aren’t you applying this to all land?’ ” Brodie said in an interview. “If you are going to have this tax, it should be applied in a way that it doesn’t attract speculation to farmland. They said, ‘We hadn’t thought of it.’ ”
Speculators can avoid the 15 per cent tax on residential property by purchasing bare farmland and building a house on it, said Brodie. This kind of development has a number of attractions. First, buyers can obtain farm properties for less than residential zoned land. As a bonus, because of controversial zoning rules, buyers can build much larger mansions on farmland than they can on residential lots. They can also take advantage of very low property taxes on farmland that are meant to encourage food production, get a 50 per cent break on school and transportation taxes, and avoid property transfer tax if a constructed home is lived in by a family member for at least a year before it is sold.
“In the last three years, we have seen the number of transactions on farmland going up in terms of speculation,” Brodie said in an interview. “In Richmond, we are seeing a number of smaller farmland lots being bought because these are attractive to speculators. And we are seeing higher prices per acre. So the trend is up, the prices are increasing, and one of the pressures is the foreign buyers tax. People are buying these properties with farming as an afterthought, just to build estates.”
In January 2014, according to land title data gathered for the combined areas of Richmond and Delta, farmland averaged $540,000 an acre. But the prices exploded to an average of $1.3 million an acre in May 2014.
In April 2015, farm prices peaked at $1.6 million an acre in these areas — seemingly in connection to an explosion of speculation across Metro Vancouver, which led to residential land prices surging by over 30 per cent. Prices across Richmond and Delta now sit at about $1.3 million an acre, on average.
In the Fraser Valley, there were 51 farm sales in August 2016 — far more than in any other region in B.C., and the highest monthly total for the Fraser Valley in recent history.
Last August, the average price jumped to $550,000 an acre, compared to $510,000 in June 2016. By October 2016, the price hit $620,000 an acre. The prices have more than doubled since July 2014, when Fraser Valley farmland sold for about $250,000 an acre.
“The calls really spiked in relation to the foreign buyers tax,” Langley realtor Danny Evans said. “I was getting a lot more calls on acreages, and I just see the prices going up.”
As in Richmond, it is the smaller farmland parcels of about two to five acres that speculators are targeting in the Valley. Depending on the location and desirability for estate building, these properties are now selling for between $1.5 million and $1.8 million, Evans said. The prices have roughly doubled in the last few years, land title data shows.
“People are not that interested in the farming aspect but they want the tax benefits, and the qualifications are very low. So you put out some beehives or blueberries, and you get about a 70 per cent property tax break,” Evans said. “Investors seek the highest and best use out of the property, so that’s why in Richmond and Langley you see these large homes on farmland.”
In South Surrey and White Rock, there were four farm sales in June 2016, and just one sale in July. In August 2016, there were eight farm sales, followed by seven in September. Prices in this area fluctuated between $300,000 and $600,000 from 2010 to 2015. In July 2016, the average price in South Surrey/ White Rock was $1.26 million an acre. In August it was $1.32 million, and by December it had jumped to a startling $1.75 million.
CHINESE, SAUDI BUYERS
Popular two-term Delta independent MLA Vicki Huntington, who chose not to run for re-election this year for health reasons, spent much of her time in office pressing the B.C. Liberal government to protect B.C.’s Agricultural Land Reserve. In the absence of provincial data on foreign ownership, she had her staff digging into land title records. The project took several years, and researchers sometimes had trouble discovering the true beneficial owners, Huntington said, because of opaque ownership structures such as numbered and shell companies.
But Huntington says her staff’s research established a growing trend of farmland purchases in B.C. by offshore interests in countries including Mainland China and Saudi Arabia. There are foreign companies that appear to be holding land for long-term agricultural needs and others buying land strategically near potential port developments, Huntington says. She says her research also pointed to concerns about the building of mega-mansions on ALR land, and foreign and local developers leaving farmland fallow, while holding out for industrial or residential rezoning.
Huntington, who came from a career in RCMP security services, said she is concerned about money laundering, and Canada’s national interests being subverted.
“We are very concerned with the levels of foreign buying of farmland in specific areas like Delta and the lower Fraser Valley, and we think there is trouble brewing,” she said. “Mainland China is certainly part of it, and it is concerning because they are deliberately acquiring land to support their national agricultural needs. They understand the incredible value.”
Huntington believes that B.C., like other jurisdictions including Alberta, Saskatchewan, Manitoba and Quebec, should restrict foreign ownership of farmland.
People are not that interested in the farming aspect but they want the tax benefits, and the qualifications are very low. So you put out some beehives or blueberries, and you get about a 70 per cent property tax break.