Estimating the effect of a land parcel index using hedonic price analysis

Abstract

The purpose of this study was to statistically test the effect of a parcel index – consisting of a combination of a soil index, a fertility index and a location index – intended to be used as a price-determining indicator for the sale of agricultural land at farmland markets. In the hedonic price model, the coefficients of the variables representing parcel index, population, gross return and parcel irrigation investment status were positive and statistically significant at a significance level of 0.01. There was a negative relationship between parcel size and sale price, which implied that the selling price per decare tends to decrease as the parcel size increases. In the study area, the prices of farmland with large parcel sizes and irrigation efficiency investments were higher. The population density in the region and gross income from farmlands were the major factors that generated demand for the land. The hedonic price model establishes an important link between the parcel index and the sale price of farmland. Based on this link, parcel index-based pricing can contribute significantly to the creation of a farmland market in Turkey.