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The agricultural land prices and land transactions development in

Slovakia and selected EU countries

I. TAKÁČ1,A. BANDLEROVÁ1

1Slovak University of Agriculture, Nitra, Slovak Republic

Abstract: The issue of agricultural land market is important for really well functioning

agricultural land market. The determination of land value depends on the purpose for which

the agricultural land is used. The article analyzes and compares the evolution of the

agricultural land market in Slovakia and surrounding countries (the Czech Republic, Poland

and Hungary). In the first part we follow the evolution of land transactions in Slovakia and

other selected member states of the European Union. In the second part of the article we

summarize the evolution of agricultural land prices in Slovakia and some new and old

member states of the European Union. In the third part we follow the evolution of agricultural

land rent transactions in Slovakia and neighboring countries in the Visegrad Four and some

selected member states of the European Union. In the fourth part of analyzing is compared the

evolution of market rental prices for agricultural land in Slovakia, and some member states of

the EU.

Key words: agricultural land market evolution, land transactions, land price, land rents,

Introduction:

The specific and unique significance of land as property is that represents natural value not

formed by human being. According to the agriculture, the land is the main production

facilities and belongs to the natural wealth of the country. The properly functioning

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agricultural land markets have vital importance for the maintenance and the development of

regions and the growth of agriculture within the EU Member States. In Slovakia is mainly in

the last period as a result of accession into the EU described as an emerging agricultural land

market, but due to the limited amount of data less transparent. The implementation of CAP

(direct payments) in the New Member States of the EU raises the question of whether affect

the land markets within the NMS is expected. Evidence of capitalisation of public support to

agriculture into land prices indicates that benefits are partly transferred toward landowners

rather than toward the targeted population (the producers). This issue is of particular

importance in countries where a large proportion of land is used by farmers who do not own

land, such as in the Slovakia where corporate farms and large individual farms rent more than

90% of agricultural land from private landowners. Based on the mentioned above the issues of

the agricultural land market development (market price and rent) in the NMS is extremely

important however can affect the competitiveness of the agricultural sector.

Goal:

The article described the evolution and compare the market for agricultural land in Slovakia

and selected EU countries in terms of:

� Sale of land market transactions,

� Market price of land

� Land rental market transactions,

� Market rental prices for agricultural land.

Data:

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The data for the article were collected from the following resources:

� data obtained from the Research Department of Law, University of Agriculture in

Nitra FEŠRR, VEGA project No 1/0357/08,

� data obtained from LICOS Research Centre of Excellence Catholic University of

Leuven, Belgium.

� data from the Eurostat database, FAO, and the Slovak Statistical Office,

� literature to address the issue

� research reports and scientific institutes of the Ministry of Agriculture:

o Report on the agriculture and food industry in Slovakia in years 2003-2007;

o Research Report Research Institute of Agricultural and Food SR

o Management of agricultural research institutions in selected countries;

o Annual reports of the Slovak Land Fund

Methods:

Within the article we used the following methods:

Time comparison using statistical indices:

j

kx x

xI =

1

to indicate in which multiple base index value is compared. Index for assessing the size of the

relative changes of selected parameters. According to the chosen basis of two types of indices

1 (Pacáková et al., 2003)

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� chain indices (indices with variable base), which compares the value of variables

during the period of its value in the previous period:

Ttx

xI

t

t

tt ,.....3,2,1;

11

==−−

� base indices (indices with a permanent base in the period), which compares the value

of variables in each period t in the base period value of z = 0:

Ttx

xI

z

t

zt ,.....,3,2,1==

Results:

I. Overview of sale of agricultural land market transactions

The volume of sales of agricultural land varied among the Visegrad countries over time. The

volume of sold agricultural land among the countries recorded an upward trend especially in

the last period.

In Slovakia was the lowest total volume of sold agricultural land. As can be seen (Table1), the

volume of agricultural land sold in the period 2001 to 2003 declined and than since 2004 have

been grown. In the year of Slovak accession to the EU the amount of sold agricultural land

twofold increase and in the case of arable land increased 70% .

Table 1 The volume of transfers of agricultural land in six selected regions of Slovakia.

Agricultural land in ha Arable land in ha

709

2001 2,110 822

2002 1,451 962

2003 912 874

2004 1,853 1,476

2005 2,754 1,899

Source: Research institute of economics agriculture and food processing, Slovakia

The evolution in the Czech Republic and Poland has been influenced by the ongoing

development process of privatization of state land. In the case of Poland (Figure 1) nearly half

of the total sold land in the period 1994 to 2005 was accounted for sales of public

land. Poland, which has the largest area of land resources within the Visegrad countries, there

were annually to approximately 100 thousand transactions with land during the period from

1995 to 2005. Within the same period was the sale of land between private parties 1.7 million

hectares, representing 10 percent of total agricultural land in the country.

Figure 1 The land sales transactions in Poland

Source: Institute for Agricultural Economics and Warsaw Agricultural Estate Agency in Warsaw, ANR and

IERiGŻ

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The Czech Republic has been growth in sales of agricultural land since 2000 mainly due to

sale of state land to farmers. Especially since 2002 yearly have entranced around 70 thousand

hectares (about 1.7% of the total land fund) State-owned land on the market. (source:

agricultural land and Cartography Office). On the other side the private annual sales volume

in the period from 1993 to 2001 represented almost 0.3% of total agricultural land. In the

period from 2002 to 2004, the annual sales volume represented around 1.5 percent and in

2005 even more than 3% of the total area of agricultural land. Increase especially in recent

years was largely due to a reduced interest rate on a loan throught guarantee fund for the

purchase of land for agricultural use.

In Hungary (Table 1) at the time of accession into the EU changed the owner of more than

213.3 thousand hectares of farmland, representing nearly 3% of total country productive

agricultural land. Much of it was sold by the application of a pre-emptive rights (91.1

thousand hectares). Transfer of ownership of agricultural land was largely carried out by other

manner than by sale. Inheritance, donation, purchase and mutual exchange of soil were

carried out in a volume of 122.2 thousand hectares. In 2006, there was a transfer of

agricultural land in the amount of 210.7 thousand hectares. Almost half of the transfers of

103.8 thousand hectares agricultural land related to inheritance, purchase, donation or

substitution. Buying throught pre-emptive in 2006 was approximately 95.5 thousand hectares

of which more than half of sales were represented by the sale between part-owners or close

relatives (49.4 thousand hectares). According to official statistics, the sale of land to citizens

of the other Member States in 2006 was negligible (700 hectares).

Table 2 The volume of transfers of agricultural land in Hungary

Agricultural land in thousand

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hectares

2004 2005 2006

Land acquired on the base of pre-emptive rights: 91.1 90.5 95.5

co-ownership, or close relatives 34.4 31.6 49.4

home tenant or farmer 37.5 33.7 36.9

farmers from the EU Member States x 0.4 0.3

public land (national land fund) 19.2 24.8 8.9

Land acquired without any pre-emptive: 122.2 109.8 115.3

inheritance, purchase, donation and Exchange 105.8 96.9 103.8

other transfers of land 16.4 12.9 11.5

Total transfers of agricultural land 213.3 200.2 210.7

source: Ministry of Agriculture and Regional Development, Hungary. Mardi - Institute of Geodesy and

Cartography and Remote Sensing. National Land Fund of Hungary.

II. The agricultural land sales prices development

The agricultural land market prices development in Slovakia and neighboring countries

experienced significant changes, particularly in the period after accession to the EU (see Chart

2). The significant increase in prices of agricultural land can be seen in the case of Slovakia,

the Czech Republic and Poland.

Figure 2 Development of the average current sales prices of agricultural land in selected

countries (V4)

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Source: Licos market research, Agricultural research institute for the Czech Republic, GUS, and ANR Zagorsky

for Poland; RIEAFI for Slovakia, the FADN for Hungary; Notes: Czech Republic - only the price of agricultural

land, private owners, Poland - The price of arable land is private and public owners, Slovakia , Hungary, the

price of agricultural land, both private and public owners

In terms of comparison between countries a constant market price index of agricultural land

provides better view of its development between countries. As shown in Figure 3 after the

countries accession into the EU, the development of real market prices of land (adjusted for

inflation) reached significantly increasing trend. Index of land price growth achieved in 2007

compared with 2001 in the case of Slovakia, 237% and 216% for Poland.

Development of market prices in the Czech Republic has been significantly affected by the

sale of state land to farmers, which began in 2000 when the agricultural land was sold at fixed

administrative prices and not at market prices. Market price index in the Czech Republic fell

in 2004 to 81% and then in subsequent years after accession into the EU grew and in 2007

reached 116%. As expected, the trend in prices has been exceptionally strong during the

countries' accession to the EU.

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When comparing prices before (2003) and the year after the EU accession (2005), the market

price of sold land increased by almost 21% in Slovakia and around 35% in Poland.

Figure 3 Indices of average fixed price of sold agricultural land per hectare (base year 2001

= 100%)

Source: own calculation, Licos land market survey

Since enlargement of the EU in 2004 have the differences in market prices between the old

and new EU Member States been gradually decreased. As shown in Table 6, the gap in the

price of land between the countries is shrinking. For example, the average market price of

land in the Czech Republic and Slovakia has been closer to the prices in Germany and

France. Figure 4 shows that the evolution of agricultural land prices in the new Member

States after accession into the EU have had significantly increasing trend in comparison with

the old Member States wrehe the development ofagricultural prices have been stable.

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Figure 4 the average fixed price indices of sold agricultural land in selected EU

countries in local currency per hectare (base year 2001 = 100%)

Source: own calculation, Licos land market survey

III. Overview of rents of agricultural land market transactions

Renting of agricultural land in many countries is the most widespread form of land

transactions. Table 1 presents aggregate data of selected countries on share of leased

agricultural land. Among individual countries, there are considerable differences in the

amount of leased land. For example, in Italy, where the agricultural policy to encourage

cultivation of land ownership, the proportion of leased land is only 26% in Belgium, where

the strong protect tenants renting land legislation, about 68% of the occupied land is leased

land. Land rents which is represented by a wide range of differences between countries

represent the main role in the land transactions within the new EU Member States,.

In Slovakia and Czech Republic, where the proportion of leased agricultural land is the largest

across the EU, the farmers leased more than 90% of the used agricultural land. Explanation of

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such a high proportion related with period of socialism. During the comunist period in those

countries the large agricultural cooperatives and state-owned companies where established.

Those companies did not own almost any agricultural land but they used agricultural land

owened by individuals in free of charge. This situation then continued during the period of

transition. Nowadays the land in the Slovakia and the Czech Republic mostly used by private

companies and cooperatives whitch do not own agricultural land but rented it.

The Hungary where the share of total rented land by the farmers is almost 60% is situated in

the midlle of the list of EU countries. The lowest share of total rented land by the farmers

within the EU and new Member States has Poland approximately 22%. This indicatior is the

lowest in Poland mainly because of the historical reasons. Since both before and during the

communist regime in the country dominated the mainly small family farms that carry out

agricultural activities on its own soil. This situation has been subsequently maintained during

the transition period till the present.

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Table 3 Share of leased agricultural land in the total used land. (%)

2003 2005 2003 2005

Slovakia 95 91 Finland 33 34

Czech republic 89 86 Great Britain 35 31

France 71 73 Spain 31 31

Belgium 68 68 Portugal 29 30

Germany 65 64 Slovenia 24 30

Hungary 56 59 Austria 26 29

Latvia 54 53 Italy 29 26

Sweden 45 40 Lituania 26 24

Holand 39 39 Poland x 22

Greece 34 36

Source: EUROSTAT

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Table 4 Share of individual farmers in agricultural land use (%)

2003 2005

Irland 100 100

Greece 100 100

Slovenia 94 95

Belgium 92 92

Holand 92 92

Finland 93 92

Lituania 89 90

Poland 88 90

Latvia 88 88

Great Britain 89 85

Austria 83 83

Italy 88 82

Sweden 81 82

Portugal 77 75

Germany 69 69

Spain 69 69

Hungary 54 50

Maďarsko 50 49

Czech republic 27 29

Slovakia 13 16

Source: EUROSTAT and country statistical offices

As shown in Chart 1 in the Visegrad countries at country level, there is a positive correlation

between the total share of leased agricultural land in countries and the share of agricultural

land used by agricultural companies, and conversely a negative correlation between the total

amount of leased agricultural land within the country and the share of agricultural land used

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by individual farmers. In the case of individual farmers the share of leased land on the total

used land is low, however they mainly cultivate their own land. Agricultural companies and

cooperatives in most cases do not own any or only a negligible amount of agricultural land

therefore they leased in extensive amount of agricultural land. This is the case of Slovakia and

the Czech Republic where companies and cooperatives have dominant position and cultivate

the large proportion of the leased agriculture land. Conversely in the Poland, where is a high

percentage of individual farmers is the low proportion of the total leased agricultural land. In

Hungary, where companies are cultivating almost the half of the total acreage, the proportion

of the total leased land within the country is almost 60%.

Figure 5 The relationship between the total share of agricultural land used by individual

farmers and the share of the total leased agricultural land (%)

Source: own calculation

IV. The evolution of agricultural land rents

Looking at the current available data about rents for agricultural land the average rents for

agricultural land in Slovakia and neighboring countries varies considerably. After accession

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Visegrad countries into the EU showed the land rents development similar direction (Figure

2).

The most significantly land rents increased in Poland and Hungary. The huge increase in rents

in Poland was due to the high price of wheat grain in particular, because the land rents are set

on the price of wheat, or distributed in the form of a kind. In terms of euro has been the

highest long-term rentals in Hungary, followed by Poland and the Czech Republic. In

Slovakia, there remains the lowest long-term rents from the former countries of the Visegrad

Four. In 2007, the average rent in Slovakia was € 24 per hectare, while in Hungary was rent

87 € per hectare, and the Czech Republic € 47 per hectare.

Figure 6 Development of rental prices of agricultural land in selected countries in € per

hectare

Source: Licos market research, Agricultural research institute for the Czech Republic, GUS, and ANR Zagorsky

for Poland; RIEAFI for Slovakia, the FADN for Hungary; Notes: Czech Republic - only the price of agricultural

land, private owners, Poland - The price of arable land is private and public owners, Slovakia , Hungary, the

price of agricultural land, both private and public owners

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Index of agricultural land rent in a real prices adjusted for inflation and exchange rate

(change in the euro against the domestic currency) thus provides a more accurate picture to

compare the development of rents between countries.

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Figure 7 Rental price indices of agricultural land at current prices in domestic currency per

hectare (base year 2001 = 100%)

Source: own calculation

As shown in Figure 3, before the accession of the countries into the EU (in 2003) came into

land rent for significantly increasing trend. The average land rent in 2007 compared to 2003

in Slovakia increased by 127% and Poland with more than 300% (the effect of wheat

prices). The Czech Republic has increased the rent for the same period by 61%. Since the year

2004 in Slovakia and neighboring countries have begun to apply the same measures

supporting the common agricultural policy of direct payments linked to land area, we assume

that some of these supports may be capitalized in land rents.

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Figure 8 Rental price indices of agricultural land in constant prices (in domestic currency per

hectare)

Source: own calculation

Figure 9 The difference of rental price indices of agricultural land (%)

Source: own calculation

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When comparing the land rents evolution within the EU the country could be divided into two

main groups.The first one representative of the old Member States, where agricultural land

rents development were more or less stable. The second group consists of the new Member

States, where the land rents shown an average annual rate of change between the ranges from

10 to 30 percent. Increasing land rents index may be explained to the some extent by

increasing support (direct payments) per average land area. However the higher rental growth

in the new Member States gradually converge the gap in the amount of land rents between the

EU Member States. Figure 6 shows that the evolution has been significantly increased rents in

the new Member States after accession to the EU and the old Member States has been stable.

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Figure 10 Rental price indices of agricultural land in selected EU countries (local currency

per hectare)

Source: own calculation,, Licos land survey

Conclusion:

The aim of our article was to analyze the agricultural land market development in Slovakia

and selected EU countries (particularly in the Czech Republic, Hungary and Poland) during

the period before and after accession in terms of land market sale transactions and prices and

land market rental transaction and rents . The volume of sold agricultural land. between the

Visegrad countries (V4) varies over time, but since accession into the EU, showed a rising

trend. In case of Slovakia was the total volume of sold land the smallest within the V4

countries. In the year when Slovakia entered the EU experienced a twofold increase in the

amount of land sold. Development of land market prices in Slovakia and neighboring

countries experienced significant changes, particularly in the aftermath of EU accession. A

significant increase in the lan prices were observed in the case of Slovakia, the Czech

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Republic and Poland. When comparing rates the year before and the year after EU accession,

increased market price of sold land by almost 21% in Slovakia and almost 35% in Poland.

Land lease in many countries is the most widespread form of land transaction. Among

individual countries, there are considerable differences in the number of leased land. In

relation to the aim we mapped the evolution and compared the market rents of agricultural

land in Slovakia and selected EU countries in terms of land rental market transactions and

market rental prices. In Slovakia and Czech Republic, where the proportion of leased

agricultural land is the largest across the EU, the farmers leased more than 90% of the used

agricultural land. The lowest share of total rented land by the farmers within the EU and new

Member States has Poland approximately 22%. At country level, there is a positive

correlation between the total share of leased agricultural land in countries and the share of

agricultural land used by agricultural companies, and conversely a negative correlation

between the total amount of leased agricultural land within the country and the share of

agricultural land used by individual farmers. In the case of individual farmers the share of

leased land on the total used land is low, however they mainly cultivate their own land. In

Slovakia and the Czech Republic where companies and cooperatives have dominant position

and cultivate the large proportion of the leased agriculture land. Conversely in the Poland,

where is a high percentage of individual farmers, is the lowest proportion of the total leased

agricultural land.

Looking at the current available data in related to the land lease the average rent for

agricultural land in Slovakia and neighboring countries varies considerably. In terms of euro

has been the highest long-term rentals in Hungary, followed by Poland and the Czech

Republic. In Slovakia, there remains the lowest long-term rents from the former countries of

the Visegrad Four. before the accession of the V4 countries into the EU (in 2003) came into

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land rent for significantly increasing trend. Comparing the land lease development between

the EU countries we figure out that evolution has been significantly increased rents in the new

Member States after accession and the old Member States has been stable.

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Contact Address:

Ivan TAKÁČ

Faculty of european studies and regional development

Marianska 10, 94976 Nitra

Slovakia

phone / fax number(s): +421 (37) 641 5607

e-mail address(es): ivan.takac@uniag.sk

Anna BANDLEROVÁ.

Faculty of european studies and regional development

Marianska 10, 94976 Nitra

Slovakia

phone / fax number(s): +421 (37) 641 5607

e-mail address(es): anna.bandlerova@uniag.sk;