Tri States Public Radio Staff
Stable land prices
Mon February 6, 2012
Expert Says Farm Land Prices Should Remain Stable
The sale of prime farm land in west-central Illinois usually brings more than $10,000 per acre.
A consultant and former WIU faculty member said that trend is likely to continue.
David Johnston said the prices for farm land are not a “bubble.” He said the prices are based on solid fundamentals.
He said low interest rates are having a limited effect.
Johnston said, “The buyers in this market are primarily cash buyers. So interest rates are irrelevant to a totally cash buyer as far as borrowing funds whatsoever.”
Commodity prices make farm land a good investment. He said as long as commodity prices remain high, so will land values. He said farmers who have disposable income usually invest in either land or machinery. He said land is the current choice of most farmers and farm machinery inventories remain high.
He said the return on land investment can range from 3% to 5% which trumps many non-farm investments. He said the return is also attracting investment from those who don't farm because of its relative safety.
He expects farm land prices to remain steady for the next two years. Johnston said buyers have much more equity in their properties than in the 1970s and 1980s when prices rose and then collapsed.