IDEAS home Printed from https://ideas.repec.org/a/ags/gjagec/232337.html
   My bibliography  Save this article

The Impact of Economic Transformation and the Credibility of Planning Control on Agricultural Land Values

Author

Listed:
  • Khalid, Haniza
  • Lloyd, Timothy Adrian
  • Morgan, Christopher Wyn

Abstract

This paper develops a hedonic model of agricultural land prices to investigate the efficacy of planning controls, whose raison d’être is to regulate the conversion of farmland. While development (commercial, industrial and residential) potential of farmland affects agricultural land values in all countries, its impact is potentially more acute in Newly Industrialised Countries where development pressure is strong and planning law is often weakly enforced. In the Malaysian land market, which epitomises this situation, State Authorities have approved a large number of applications to convert land from agriculture to development, such that the market is inclined to behave as if planning control lacks credibility. To investigate the influence of 'development potential' on land legally designated as agricultural in Malaysia, an extensive dataset of over 2,000 land sales has been assembled. Using this database we attempt to estimate the effect – the development rent – on land price, which turns out to be high, exceeding 400% of agricultural value in some cases. From there, we draw some conclusions regarding the efficacy of existing planning controls and the implications of such a high premium. Der Beitrag untersucht, wie sich Bodenpreise und Landnutzungsentscheidungen im wirtschaftlichen Entwicklungsprozess verändern. Das nichtlandwirtschaftliche Nutzungspotenzial von Agrarflächen für Gewerbe, Industrie- und Wohnzwecke beeinflusst den Kaufpreis von Boden allerorten. Dieser Einfluss ist besonders ausgeprägt in Entwicklungsländern, in denen einerseits der Druck zu Flächenumwidmungen ausgeprägt ist und andererseits Instrumente zur Planung und Regulierung von Nutzungswechseln landwirtschaftlicher Flächen fehlen oder nicht konsequent durchgesetzt werden. Am Beispiel von Malaysia wird gezeigt, dass die unscharfe Umsetzung von Regeln, die dem Erhalt landwirtschaftlicher Flächen dienen, zu Spekulationsprämien führen, die auf eine spätere gewerbliche oder bauliche Nutzung derzeitiger Agrarflächen abzielen. Im Einzelfall kann der Preis landwirtschaftlicher Flächen, für die Marktakteure ein Entwicklungspotenzial sehen, bis zum Vierfachen des rein landwirtschaftlichen Wertes betragen.

Suggested Citation

  • Khalid, Haniza & Lloyd, Timothy Adrian & Morgan, Christopher Wyn, 2013. "The Impact of Economic Transformation and the Credibility of Planning Control on Agricultural Land Values," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 62(02), pages 1-12, May.
    • Handle: RePEc:ags:gjagec:232337
    DOI: 10.22004/ag.econ.232337
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/232337/files/5_Khalid-w_rth.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.232337?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2012. "Lobbying, political competition, and local land supply: Recent evidence from Spain," Journal of Public Economics, Elsevier, vol. 96(1), pages 10-19.
    2. Linneman, Peter, 1980. "Some empirical results on the nature of the hedonic price function for the urban housing market," Journal of Urban Economics, Elsevier, vol. 8(1), pages 47-68, July.
    3. Yue Jin Shi & Timothy T. Phipps & Dale Colyer, 1997. "Agricultural Land Values under Urbanizing Influences," Land Economics, University of Wisconsin Press, vol. 73(1), pages 90-100.
    4. Brueckner, Jan K., 1997. "Infrastructure financing and urban development:: The economics of impact fees," Journal of Public Economics, Elsevier, vol. 66(3), pages 383-407, December.
    5. D Maddison, 2000. "A hedonic analysis of agricultural land prices in England and Wales," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 27(4), pages 519-532, December.
    6. Haixiao Huang & Gay Y. Miller & Bruce J. Sherrick & Miguel I. Gómez, 2006. "Factors Influencing Illinois Farmland Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 458-470.
    7. Halvorsen, Robert & Pollakowski, Henry O., 1981. "Choice of functional form for hedonic price equations," Journal of Urban Economics, Elsevier, vol. 10(1), pages 37-49, July.
    8. Ian W. Hardie & Tulika A. Narayan & Bruce L. Gardner, 2001. "The Joint Influence of Agricultural and Nonfarm Factors on Real Estate Values: An Application to the Mid-Atlantic Region," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 120-132.
    9. Nancy E. Bockstael, 1996. "Modeling Economics and Ecology: The Importance of a Spatial Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1168-1180.
    10. J. S. Shonkwiler & J. E. Reynolds, 1986. "A Note on the Use of Hedonic Price Models in the Analysis of Land Prices at the Urban Fringe," Land Economics, University of Wisconsin Press, vol. 62(1), pages 58-63.
    11. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    12. Cynthia J. Nickerson & Lori Lynch, 2001. "The Effect of Farmland Preservation Programs on Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 341-351.
    13. Towe, Charles A. & Nickerson, Cynthia J. & Bockstael, Nancy E., 2005. "An Empirical Examination of Real Options and the Timing of Land Conversions," 2005 Annual meeting, July 24-27, Providence, RI 19125, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Cotteleer, Geerte & Stobbe, Tracy & van Kooten, G. Cornelis, 2008. "A Spatial Bayesian Hedonic Pricing Model of Farmland Values," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44137, European Association of Agricultural Economists.
    15. Fritz M. Roka & Raymond B. Palmquist, 1997. "Examining the Use of National Databases in a Hedonic Analysis of Regional Farmland Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(5), pages 1651-1656.
    16. Pardew, Jolie B. & Shane, Ronald L. & Yanagida, John F., 1986. "Structural Hedonic Prices Of Land Parcels In Transition From Agriculture In A Western Community," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 11(1), pages 1-8, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Khalid, Haniza & Lloyd, Timothy Adrian & Morgan, Christopher Wyn, 2013. "The Impact of Economic Transformation and the Credibility of Planning Control on Agricultural Land Values," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 62(2).
    2. Schilling, Brian J. & Sullivan, Kevin P. & Duke, Joshua M., 2013. "Do Residual Development Options Increase Preserved Farmland Values?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(3), pages 1-17.
    3. Bell, Kathleen P. & Irwin, Elena G., 2002. "Spatially explicit micro-level modelling of land use change at the rural-urban interface," Agricultural Economics, Blackwell, vol. 27(3), pages 217-232, November.
    4. Khalid Haniza, 2015. "Spatial heterogeneity and spatial bias analyses in hedonic price models: some practical considerations," Bulletin of Geography. Socio-economic Series, Sciendo, vol. 28(28), pages 113-128, June.
    5. Kathleen P. Bell & Timothy J. Dalton, 2007. "Spatial Economic Analysis in Data‐Rich Environments," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 487-501, September.
    6. Benoît A. Delbecq & Todd H. Kuethe & Allison M. Borchers, 2014. "Identifying the Extent of the Urban Fringe and Its Impact on Agricultural Land Values," Land Economics, University of Wisconsin Press, vol. 90(4), pages 587-600.
    7. Livanis, Grigorios T. & Moss, Charles B. & Breneman, Vincent E. & Nehring, Richard F., 2005. "Urban Sprawl and Farmland Prices," Working Papers 15657, University of Florida, International Agricultural Trade and Policy Center.
    8. Lynch, Lori, 2003. "Do Agricultural Preservation Programs And Preferential Property Tax Programs Affect Farmland Conversion?," 2003 Annual meeting, July 27-30, Montreal, Canada 22100, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Ayala Wineman & Thomas S Jayne, 2018. "Land Prices Heading Skyward? An Analysis of Farmland Values across Tanzania," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 40(2), pages 187-214.
    10. Choumert, Johanna & Phélinas, Pascale, 2015. "Determinants of agricultural land values in Argentina," Ecological Economics, Elsevier, vol. 110(C), pages 134-140.
    11. Ma, Shan & Swinton, Scott M., 2011. "Valuation of ecosystem services from rural landscapes using agricultural land prices," Ecological Economics, Elsevier, vol. 70(9), pages 1649-1659, July.
    12. Wendong Zhang & Cynthia J. Nickerson, 2015. "Housing Market Bust and Farmland Values: Identifying the Changing Influence of Proximity to Urban Centers," Land Economics, University of Wisconsin Press, vol. 91(4), pages 605-626.
    13. Reed, L.L. & Kleynhans, Theo E., 2009. "Agricultural land purchases for alternative uses – evidence from two farming areas in the Western Cape province, South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 48(3), pages 1-20, September.
    14. Tione, Sarah E. & Holden , Stein T., 2019. "Urban proximity, demand for land and land prices in Malawi," CLTS Working Papers 1/19, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    15. Lynch, Lori & Carpenter, Janet, 2002. "Does The Farm Sector Have A Critical Mass?," Working Papers 28552, University of Maryland, Department of Agricultural and Resource Economics.
    16. Ritter, Matthias & Hüttel, Silke & Odening, Martin & Seifert, Stefan, 2020. "Revisiting the relationship between land price and parcel size in agriculture," Land Use Policy, Elsevier, vol. 97(C).
    17. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia.
    18. Ritter, Matthias & Huttel, Silke & Odening, Martin & Seifert, Stefan, 2019. "Revisiting The Relationship Between Land Price And Parcel Size," 2019 Conference (63rd), February 12-15, 2019, Melbourne, Australia 285062, Australian Agricultural and Resource Economics Society (AARES).
    19. repec:zbw:inwedp:582015 is not listed on IDEAS
    20. Oltmer, Katrin & Florax, Raymond J.G.M., 2001. "Impacts Of Agricultural Policy Reform On Land Prices: A Quantitative Analysis Of The Literature," 2001 Annual meeting, August 5-8, Chicago, IL 20507, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Lambert, David & Shultz, Steven, 1999. "Implicit Prices of CRP Enrollments, Wetlands, and Soil Quality in North Dakota," Western Region Archives 321699, Western Region - Western Extension Directors Association (WEDA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:gjagec:232337. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iahubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.