Analysis of factors influencing standard farmland values with regard to stronger interventions in the German farmland market

Abstract

Considerable increases of farmland prices have led to discussions as to whether stronger interventions in farmland markets are necessary or not. However, altered or new interventions in farmland markets should be based on previous analyses of factors causing price differences. To give more insight in the German farmland market, a general spatial model of standard farmland values for arable land in the federal state North Rhine-Westphalia is estimated using municipal level cross-section data. Results indicate high competition for arable land. Urban sprawl and livestock production are the main price drivers. In Germany, a set of legal regulations exists that reinforce these price-increasing impacts and, hence, have counterproductive effects on interventions aiming to reduce price increases. Therefore, it should be more effective and efficient to alter existing regulations that reinforce the price-increasing impacts instead of creating new regulations.