The relations between the rent and price of agricultural land in the EU countries

Abstract

The price of agricultural land and its value are of importance when forming the production potential of agricultural enterprises. The price of land marked an irregular development in the period 2006–2007 having increased in the majority of the EU states. The proportion of rent to the market price of land referred to as the capitalization rate kept varying within the range of 2–3%. The price of a site should, besides the land rent, also reflect the interest on the land rent received. The price of agricultural land with respect to the land rent manifests relatively important price inertia. This inertia in connection with a high growth rate of land rent results in the unrealistically high interest rate. Such situation is an evident advantage for land owners and is, on the contrary, a disadvantage for the tenants of the agricultural land. To make the interest rate realistic means especially stabilizing the land rent with low growth rates. These growth rates are different for different states. In general it can be maintained that the relative increase in land rent should not surpass 4%, exceptionally 6%.