THE FARMLAND PRICES AT THE URBAN FRINGE- SOME EMPIRICAL EVIDENCE

Abstract

It is well documented that the sales price of farmland at the urban fringe is strongly affected by the development of the city. The divergence between sales (market) price and use value (income-capitalized value) indicates the potential conversion of land from farming to urban uses. The magnitude of this price (value) difference is believed to be associated with a number of urban factors. This study empirically examines the price differences in a spatial context. I-Lan, a city that has in recent years seen a surge of purchase in farmland, mostly at the urban fringe, is examined as a case study. A total of 2397 pieces of farmland transacted from year 2000 to 2005 are analyzed. The price difference between sales price and use value is largely explained by factors such as the distance to the employment centres, the accessibility to the major transportation node, the site suitability for urban use, among others. Moreover, the price differences diminish drasti cally with the distance from the city centre. Using the price difference at the city centre as the benchmark, price differences are reduced by approximately two-thirds at the 10 km (6 miles) from the city centre. The price differences have become insignificant at the location of 30 km (19 miles) from the city centre. The empirical findings confirm that the farmland prices are significantly affected by the urban factors. The price of farmland, particularly for those located within 10 km from the city, is scarcely explainable by farming revenue. Farmlands close to the city are priced as an urban site with the expectation of land conversion in the near future.