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St. Gregor, SK, Canada | This is something I was told by a wise, old, and very rich man a few years back. It's always stayed with me... even though I couldn't understand at the time what he meant.
"When everyone says something has nowhere to go but up, you are guaranteed it's going down".
Has land been slowly edging up for 20 years? Yes... I'd fully expect it to. Land has to keep up with inflation. Money is continually becoming worth less, so land, though not increasing in real value is increasing in money value.
However, one thing is a linear increase... Perhaps even a few % above inflation.
Chart land values for the past 25 years. I did it here and in a market I'm looking to buy in. 5.5% rate of gain average over the past 25 years... Not counting the last 5. 40% gain in the last 5.
This is the definition of a bubble.
Russia has issues. However, at some point it will become lucrative enough that these issues will be overcome... The land is extremely fertile, and just needs competent managers. Since 2008 we've had many Europeans move into the region and start producing corn upwards of 300bu/ac, and what in the range of 120 - 150 bu/ac as an example. Simply look at large operations such as Black Earth Farms Ltd as an example.
I recall reading on here in 2007 and early 2008 that "grain prices will NEVER go down. Only up up up" I also recall canola at $7/bu and corn at $3/bu not too long after ;)
There are many variables. However if inflation becomes rampant, and I'm not surprised if it will - it doesn't need to be hyperinflation... If it is sufficient to force interest rates into the 7% and 8% ranges... you will see farmland collapse... for two reasons. 1. Investors will get a much better rate of return from money markets and start to dump land. If land comes available, prices drop. Investors are panicky people if they see their assets drop, they liquidate even faster to cut their losses (dumbest move possible). 2. Many who bought land at these high prices will over extend themselves and the land will be re-sold by bankers.
The 80s happened once. They'll happen again, guaranteed. It all just depends on when, imho. | |
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Let's Step Back 5 x 5.
