If you’ve been watching the equestrian real estate market in Ontario, you might have seen that prices are on the rise and have been for some time.
We’ve been watching the price trends closely over the years.
As of writing this article, in October 2020, here are some average prices to take note of:
**** These prices are for properties in the greater golden horseshoe only. ***
Where the property has a home and a small barn. Possibly some paddocks. The average list price is currently around $1,864,000. In fact, most sales for this type of property happen around the $1,200,000 to $1,500,000 mark.
Where the property has a home, barn, indoor arena, and possible outdoor arena. That is, infrastructure to warrant the name “facility”. You are currently looking at an average list price of about $3,700,000. However, we see that the majority of sales for equestrian facilities happened somewhere between $1,900,000 to $2,500,000 this year.
Now, we know averages can be skewed depending on the number and types of listings available. And, also by a result of very high and very low outlier properties. For instance, there is currently two very high-end equestrian facilities listed at $18,000,000 and $19,000,000 that will be playing a factor in price here.
Also, properties with a barn, existing fencing and/or arenas often come at a premium when compared to properties without these items.
Now, the added value of infrastructure isn’t the only reason impacting horse farm prices in Ontario. Similar to other types of real estate, other forces seem to be playing a role in prices across the Province.
1. Real Estate is Increasing Across the Board
Well, at least residential real estate is.
In fact, according to CREA, we are looking at a 14.9% average price increase in the first 9 months of this year when compared to the first 9 months of 2019. It should be expected then, that larger properties – hobby farms and equestrian facilities – would increase in price as well.
Farmland values are also on the rise and have been since about 1987. According to Farm Credit Canada, the average value of Canadian Farmland increased by 5.2% in 2019. With Ontario seeing an increase of 6.7% in 2019 as well. To put a number value on this, in 2019, it was reported that in Southwestern Ontario, farmland prices were at a total average of $14,458 PER ACRE.
And as has often been the case, farmland values are often good indicators of price trends in general.
2. The Cost to Borrow Money – Interest Rates
Naturally, interest rates have an impact on the value of investments, real estate included.
In an attempt for the government to keep money flowing through the economy during the pandemic we’ve just experienced, we saw the lowering of interest rates. This is part of why we are seeing such high levels of buyer activity in residential markets and more competition than in the previous couple of years.
This goes for farmland as well… according to a study by Bonnefield, along with a number of other factors, historically “Low interest rates reduce the cost of capital to acquire farmland; therefore, periods of low interest rates correlate with higher farmland values.” Or at least this is what we have witnessed historically.
Similarly, with low interest rates, the cost to borrow money to buy a horse property becomes attractive to more people.
Lower interest rates might mean people are more willing to take the risk to purchase a horse property now, possibly more so than we have seen before. Especially properties that would accommodate a private facility. With barn shutdowns and the uncertainty of whether we will see another shutdown, horse people are looking at this as a viable alternative to paying board.
We would say that, with things being as they currently are, and should interest rates remain low, we are likely to see continued demand for horse and hobby farms. And a drive upwards in values to continue. Perhaps not at such a substantial rate as we’ve seen this year, but likely at more typical rates.
There has also been a serious lack of good properties to choose from for some time. This has resulted in pent-up demand from the buyer’s market and leads us to our next point.
3. There Isn’t Much Good Inventory to Choose From
In many facets of the residential real estate market, finding a good home at a good price has become difficult. When one does come up, it seems it is either snapped up by a buyer within a few days or you find yourself competing for the property.
In terms of properties that can accommodate horses, relatively speaking, there aren’t many of these types of equestrian properties available for purchase in the first place.
It is simple economics that higher demand and limited supply equal an increase in value.
As of writing this post, there are about 180 equestrian type properties (i.e. equestrian facilities and hobby farms) in the Greater Golden Horseshoe area. Now, I say about because some listing agents do not accurately categorise these properties as being hobby or horse farms. But that is a rant for another time.
And of course, this number can fluctuate daily and monthly with sales and listings coming on to the market.
But, this is not a lot to choose from, from an already “unique” subset of residential real estate. And what narrows it down even further are the high priced properties (over $2 million) and the ones that need a complete renovation on the lower end. You (and many others) are then left with just a few good options to choose from.
Although these may be considered a niche property, i.e. not everyone has a horse or wants a property with a barn on it, they are still in high enough demand.
There are more people looking to move to the countryside nowadays and a barn can provide as useful storage. Alternatively, a barn can also be used to keep other animals like chickens, lamas, and such. So you are now competing with people who want a little hobby farm, or country home, as well… and believe me we are seeing more and more every year.
4. The Added Value of Infrastructure
If someone has purchased a property with a home on it, added a barn and perhaps some fencing for paddocks – others looking for this are going to pay a premium before they settle on a property without the existing infrastructure. What I am saying is, if someone wants this type of property and can afford to, they will pay for the value already added.
As for equestrian facilities, if you read our article on the costs of building an equestrian facility you will know the cost to build an equestrian facility is extraordinarily expensive. So these types of niche properties are going to go for a premium as well.
Now, it is also worth noting that these properties do take a longer time to sell and it is likely because of the higher price point on average. They may not be as “liquid” as a single-family home in the city, for example. However, the more that people want out of that fast-paced lifestyle, and the more people who can work from anywhere, the more hobby farms, country homes and small facilities will be harder to acquire.
5. Location is a Big Driving Factor in Price
For the most part, horse properties in high demand also seem to be in locations where real estate prices are at their highest.
For example, York, Peel (Caledon specifically), Halton and parts of Wellington and Dufferin Counties are considered prime equestrian locations. They are close to all horse necessities – show venues, vets, race tracks and so on. These areas also have a close proximity to Toronto. As such, these locations are going to see higher prices.
Hamilton (specifically Flamborough) is another area not far behind in terms of popularity, proximity, and rising prices for horse and hobby farms.
Importantly though, as these more expensive areas make it tough to find an affordable horse facility, people look to other areas for opportunities. We see people pushing out to more rural parts of Simcoe, Wellington and Dufferin Counties as well as regions like Niagara and as already mentioned, Hamilton. We have seen a lot of value increases in these areas as a result of increased demand.
You might be reading this article and thinking to yourself that now isn’t the time to buy a horse property or hobby farm. And you could be right.
Prices are quite inflated and at the recorded 14.9% average increase in residential property prices over the first 9 months of 2020, this is not a sustainable rate of appreciation.
But here is something to think about … when we saw a similar market in 2016 and 2017, many said they were going to wait to buy a property until the market “falls”. Well, many are still waiting and have missed out on some serious appreciation gains. Also, with interest rates being where they are, it might be a good idea to take advantage of them as they are now.
It is also worth noting that, never have we seen such a push and opportunity for people to leave the suburbs and the cities to move to the countryside. As people look for affordable living options outside of the major cities and for peace and space in a rural setting, we will see more and more of this each day.
Unless something extremely drastic happens, we are still likely, at worst, to see a return to more normal appreciation rates of about 3-5% per year. This will not mean a drop in real estate prices but rather a less drastic increase in average prices from where they currently are to, rather, a more sustainable rate of appreciation.
But, without a crystal ball it is difficult to say where things will go with certainty. Many thought a pandemic would cause a sizable slowdown to the market, and it did for a few weeks. But even now, still in a pandemic, the market is performing, arguably better than it ever has.
Canada will continue to be a place investors look at to purchase property and a place people look to as a place to call home. And country homes, hobby farms and equestrian properties are not an exception to this.