Location determinants of agricultural land prices

Abstract

This paper analyses determinants of agricultural land prices in Sweden with a particular focus on location-specific factors. An asset-pricing model is used to decompose agricultural land prices into expected returns from land in its current agricultural use and expected returns from its potential use. The model is estimated in a cross regional context where explanatory factors relate to regional variations in land productivity, agricultural support payments and urbanising influences. Results indicate that both agricultural and non-agricultural factors are influential determinants to the price of agricultural land. Estimating marginal effects across the distribution of the dependent variable, non-agricultural factors are shown to be more important in regions that have high agricultural land prices, whereas, income support to farmers in the form of the decoupled single farm payment is shown to be most influential in regions with low agricultural land prices.Keywords Land price · Asset pricing · Single farm payment · Quantile regression

Land markets in EuropeInstitutions and market outcomes 1

“…In contrast, Karlsson and Nilsson's (2014) estimates suggest no impact of the SPS on land sales prices in Sweden (hybrid model). This contradicts the findings of Nilsson and Johansson (2013). Both studies use the same data from the Swedish Mapping, Cadastral and Land Registration Authority for the period January 2007 to December 2008.…”

“…These differences in methodology imply that when controlling for interdependencies between local and regional factors and spatial spillover effects between neighboring farms, the SPS becomes unimportant in determining land sales prices. Similarly, Feichtinger and Salhofer (2015b) control for spatial spillover effects and interdependencies and find lower capitalization elasticity for sales prices in Bavaria in Germany (0.20-0.28) than Nilsson and Johansson (2013).…”

“…Guastella et al (2014) find a statistically insignificant impact of the SPS on land rents in Italy, where the historical SPS model is implemented. Nilsson and Johansson (2013) analyze the SPS impacts in Sweden, whereas Kilian et al (2012), Feichtinger and Salhofer (2015b) and Klaiber et al (2016) analyze the SPS impacts in Bavaria (Germany) and find a comparably high capitalization rate. The former study finds that the elasticity of agricultural land sales price with respect to the SPS is 0.54 (i.e., a 1 percent increase in the SPS increases land sales price by 0.54 percent), whereas the latter three studies find that 35 to 94 percent of the SPS are capitalized into land rental prices.…”

“…The two studies differ in the methodology they employ. Karlsson and Nilsson (2014) use a spatial multilevel model that accounts for spatial spillover effects and interdependencies, while Nilsson and Johansson (2013) apply asset-pricing model where land price is determined by the expected returns from its current and potential future uses. These differences in methodology imply that when controlling for interdependencies between local and regional factors and spatial spillover effects between neighboring farms, the SPS becomes unimportant in determining land sales prices.…”

Czynniki Wartości Ziemi Rolnej W Kontekście Zróżnicowanych Funkcji Obszarów Wiejskich W Polsce

“…There is evidence that decoupled payments exercise greater impact on the land prices than coupled payments (Latruffe, LeMouël et al, 2009;Latruffe et al, 2008;Duvivier et al, 2005;Patton et al, 2008;Ciaian and Kancs, 2012). In the research by Nilsson and Johansson (2013), the marginal effect of single area payment in Sweden is 0.54, which proves that decoupled payments translate into higher prices of land. This was also confirmed by earlier research with elasticity coefficients below 1 (Clark et al, 1993;Weersink et al, 1999).…”