Investors’ impact on Czech farmland prices: a microstructural analysis

Abstract

This paper analyses farmland price formation under investors’ increased demand in the Czech Republic from 2008 to 2014. We adopt a stochastic metafrontier approach to hedonic price modelling and investigate the relative differences in farm and investor pricing. Our results provide evidence of buyer group-specific land valuations, asymmetric price dispersions and their temporal changes. These changes reflect the developments of market microstructures and market-supporting institutions induced by buyer competition. While initially significantly lower due to high market and bargaining power, prices paid by corporate/cooperative farms converged with high-level investor prices over time. Individual and family farms were largely unable to compete at the new price levels.

Tenant Favoritism and Right of First Refusals in Farmland Auctions

“…Likewise, larger lots with a higher share of arable land attract more bidders and achieve higher prices (Ritter et al 2020;Piet, Melot, and Diop 2021). Farmer bidders may benefit from economies of scale by larger plots, and non-farmer buyers intending to generate income from leasing the purchased land may benefit from finding solvent farmer-tenants at a lower cost (Hüttel et al 2020;Curtiss et al 2021).…”

“…with capital gains from resale(Magnan and Sunley 2017; Visser 2017) Curtiss et al (2021). argue for classifying the buyer group as financially strong, and Tietz,…”

Measuring liquidity in agricultural land markets

“…This requires a microstructural analysis based on AFR 82,4 transaction data in which market thinness can be separated from other price determinants, such as land amenities and characteristics of buyers and sellers. Curtiss et al (2021) propose a modified hedonic pricing model that enables the decomposition of land price determinants by means of a stochastic frontier model. The incorporation of liquidity indicators in this model would be a promising direction for further research.…”

A survey of literature examining farmland prices: A Canadian focus

“…They find that non-agricultural investors bid higher prices than agricultural buyers. Curtiss et al (2021) examine the dynamic impact of non-agricultural investors on prices between 2008 and 2014. They find that local agricultural buyers in the Czech farmland market have substantial market power relative to local sellers, resulting in relatively low farmland sale prices.…”

“…Curtiss et al. (2013; 2021) use farmland sales in the Czech Republic, which did not introduce restrictions to limit outside investors, to examine the impact of non‐agricultural investors on farmland prices. They find that non‐agricultural investors bid higher prices than agricultural buyers.…”