Land Values and the Fiscal Cadastre

Abstract

Classic economic theory holds that there are three vehicles for generating wealth in an economy—capital, labour, and land. Land is fundamental, for labour cannot live without space and capital cannot be managed without offices and the infrastructure that is built upon the land. The management of land has social, political, and economic dimensions. While the post-war land reforms were driven largely by political agendas, current reforms are primarily concerned with the development of land markets. In their study of urban land markets, the Organization for Economic Cooperation and Development (OECD) pointed out that: . . . Land plays an important role as a financial asset. It is an important element in the portfolios of central and local government, nationalized industries, private companies and financial institutions. Financial markets and property markets are intimately connected. Land, especially seen from an historical perspective, is often considered from an investor’s point of view as a superior asset to the financial assets available on capital markets, mainly because of the potential of land to maintain its value over time and because of favourable tax treatment. The more capital and land markets are developed, the higher is the degree of possible substitution between land and other assets. Land and building values together can account for a substantial share of the market capitalization or many businesses and are often a prime consideration of corporate strategy. Stock market growth can be fuelled by rising prices in real estate markets when land is used as collateral for loans. Should land and prices fall in a volatile market place, a high level of dependency on land and property-based assets may carry the risk of serious financial disruptions. . . . The report went on to state that: Land policy cannot be effectively designed and pursued if governments do not understand how their land markets operate (OECD 1992). Land and property are important components in any market driven economy—their value is a measure of the wealth of any society and probably accounts for more than 20 per cent of GDP (UNECE 1996). In most countries, the biggest landowner is the state.