IL Farmland Prices Continue Double Digit Rise
Source: Illinois Farm Bureau
March 24, 2008
Prices being paid for Illinois farmland are holding firmly in ranges from up six percent to 17 percent over previous years across all land classes, according to a report issued Monday at the Illinois Land Values Conference in Morris. The report is based on survey work done among members of the Illinois Society of Professional Farm Managers and Rural Appraisers and compiled and summarized by staff at the University of Illinois.
"The survey results show us that farmland is still heavily in demand as an investment commodity," says Bob Swires, AFM, chairman of the Conference and principal of Swires Land & Management Company based in Danville. "The change that we have seen over the past couple of years is continuing." He notes that the role of the 1031 Tax-Deferred Exchange buyer has diminished and more farmland is being bought by local farmers.
The factors behind the buoyancy are numerous, Swires says. "High commodity prices mean more cash for producers; there is very strong demand for Excellent Productivity properties, which has mean a switch in demand to land that would be rated Good or Average; and investors are seeing agriculture as a producer of energy, not food, and that is making investment in land very attractive."
Many expected the slowdown in urban development would take pressure off prices paid for land, but that has not happened. "We began seeing a change in 2006 with reduced influence from 1031 tax-deferred purchasing, and that has continued. It seemed to peak in 2005 when survey respondents indicated 56 percent of sales were related to 1031 exchanges. That dropped to 43 percent in 2006 and has dropped even further, to 34 percent, in 2007.
Who's Selling
Estate sales account for 45 percent of properties that are coming onto the market, with farmers coming in at 22 percent and retiring farmers making up 17 percent. For non-estate sales, the primary reason for selling in 2007 was primarily because the owners were offered a good price for the land.
When asked about the possibility of farmland price declines over the next five years, 30 percent of the respondents indicated price declines were not very likely and 70 percent indicated somewhat likely. No one indicated that land price declines were very likely.
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