Development Of Land Markets In Selected EU-countries And Land Ownership Strategies On The Farm Level

The development of the land markets for selected European Countries (B, DK, D-W, F, NL) and the effects of agricultural policy reforms on land prices are analysed in “Part I – Land Markets at the Country Level” of this article. The variables describing the agricultural land markets are land prices, prices for rental land and the share of rented land. Over a longer period of about two decades, the prices for agricultural land have been decreasing in real terms in general (exception NL) while rental prices have been more stable. A regression analysis shows increasing price effects on prices for agricultural land and on rental prices due to the ha-premiums, which were introduced by the Common Agricultural Policy(CAP)-Reforms in 1992.

In “Part II – Farm Level Strategies for Land Purchase” the economic effects of changing land ownership are analysed using the data base of Part I. Recommendations for farmers are to find out if long term rental contracts are available to avoid tying up capital. If land market prices are lower than a certain threshold, land can be bought considering the financial liquidity of the enterprise. Selling land could be appropriate to avoid financial liquidity stress, but this should be only temporary and restricted to a marginal amount of land stocks. If profitability of crop production is relatively low or land prices are relative high and rental contracts terminated, an entrepreneur should seek to rent new land, if possible, or find alternative investments which yield higher profits than crop production.