State farmland values are up a robust 3.5 percent this year over last, bucking the trend in the flagging housing market.
The state’s farmlands are valued at an average of $5,800 an acre, according to a recently released Agricultural Statistics Board report. Compare that to a 13-percent dip in average home sale values in the second quarter compared to last year.
Finding average local farmland values is difficult, but Augusta County is likely playing a part in the statewide spike, said David Hickey, owner of Blue Ridge Appraisals
“Land around here is selling for anywhere from $6,000 to $10,000 an acre,” Hickey said. “It depends on where you are in the county. In Southside Virginia, $2,000 or less is not uncommon. In Rockingham, it is not uncommon to see $10,000 an acre up there.
“I’d say Augusta County fits in the upper part of the scale, just from what I’ve seen all over the state. We’re a little bit better than the average, I think. From what I’ve seen, we are clearly superior to Southside Virginia, but not as good as the horse country in Loudoun and Fauquier County.”
The surge in values might have more to do with property taxes and new residents than agriculture, said Thomas Stanley, Augusta County’s Virginia Cooperative Extension agent.
“If you look at the statistics, Virginia is one of the lowest tax states in the country,” Stanley said. “Particularly on property taxes. If you look at other states, particularly in the northeast, a lot of people are relocating from Connecticut and New York for much much lower property taxes.”
Virginia ranks 23rd best among the 50 states in property tax rates, according to a recent survey by the Washington, D.C.-based Tax Foundation, a nonpartisan educational organization.
Farmland values nationwide are strong despite the economic downturn because of many factors, according to the Agricultural Statistics Board.
“Strong commodity prices and farm programs, outside investments, favorable interest rates and tax incentives continue to be factors that drive farm real estate values to record levels,” the board report said.
In Augusta, amenities create a draw for those looking to relocate, Stanley said.
“It’s primarily our quality of life,” said Stanley. “And our scenery. Our climate is moderate – winters generally aren’t very severe. We have an excellent health care network and any number of excellent hospitals ... . You’ve got cultural amenities and entertainment, as well as outdoor activities from hunting to fishing. All those things make [Augusta County] a great place to live.”
The influx of new residents is a leading factor in escalating property values.
“Anytime you’ve got people moving in, your demand for real estate is going to go up,” Stanley said. “From a real estate market standpoint and what’s driving real estate values, and consequently farmland, it’s all real estate based.”
Stanley described this phenomenon as a “double-edge sword.” Real estate values and, by extension, farmland values are rising, but land parcels are being broken up to accommodate new farmers.
“It’s getting harder and harder to find parcels of more than 75 acres,” Stanley said. “So, if you’re relying a great deal on cattle grazing, you’re not going to get many cattle on 75 acres. There is also the issue of driving and moving heavy equipment in order to go to individual locations. That is one reason we’re [Virginia] not as competitive as in the Midwest. Midwestern farms are large, contiguous land tracts.”
Hickey says that the assessment of farmland varies depending on several factors.
“Size plays such a critical role in this,” Hickey said. “We try to stratify values by use types. That statewide average is just a little bit of everything. Some farmland is better than other farmland.”
Higher farmland values are important to farmers as they reach retirement age.
According to the most recent survey conducted by the Economic Research Service of the United States Department of Agriculture, in 2002 the average age of principal farm operators was 56.
“It is the appreciation of real estate values, which secure the retirement of many of our farmers who have worked on the land and have no other retirement savings other than their real estate,” Stanley said. “In that regard, this increase in real estate prices is extremely important for them due to the increasing cost of health care and long-term care issues.”
According to Stanley, most full-time farmers depend on rented land. The Agricultural Statistics Report says that the average rent per acre for Virginia farmlands is $22.
“Most of our full-time farmers are highly dependent on rented land and I look for that to continue,” Stanley said. “Most farmers that are making a living from full-time farming are going to be continually dependent on securing rented land they can farm. When you look at full-time farming, though, the issue – as more and more people move in – more parcels will get fragmented.”