Land tenure Institutions

Posted April 1998

Land Reform Bulletin: 1997/2
Réforme agraire: 1997/2
Reforma Agraria: 1997/2

Agricultural land values and urban growth

Tiziano Tempesta
Researcher in rural land management
and Mara Thiene
Ph.D. student (land planning and environmental issues management)
Dipartimento Territorio e Sistemi Agroforestali, Facoltà di Agraria,
Università di Padova, Italy.


The study of the dynamics of land markets has shown for some time that the value of land is related to a number of different economic and non-economic factors and that many people involved in land sales are unconnected with the primary sector. The present article is aimed at verifying which factors determine land values in the metropolitan area of Padua, Italy, a territorial context that is deeply permeated by the urban effect. It can be hypothesized that, in such a setting, typically agricultural factors such as soil fertility, the presence of crops and the availability of water for irrigation are now of secondary importance in determining the value of land. On the other hand, variables such as an urban destination of land use, accessibility to various types of urban areas and vicinity to important communication routes could assume a predominant role.


Valeur des terres agricoles et croissance urbaine

De l’étude de la dynamique du marché foncier, il ressort depuis quelque temps que la valeur des terres est liée à un certain nombre de facteurs économiques et non économiques et que beaucoup de ceux impliqués dans la vente de terres sont étrangers au secteur primaire. La présente étude vise à vérifier quels sont les facteurs qui déterminent les valeurs foncières dans un contexte territorial profondément imprégné de l’effet urbain, à savoir la zone métropolitaine de Padoue. Dans un tel contexte, on peut supposer, qu’en règle générale, les facteurs agricoles, tels que la fertilité du sol, la présence de cultures typiques et la disponibilité d’eau d’irrigation, jouent désormais un rôle secondaire dans la détermination de la valeur des terres. En revanche, des variables comme l’orientation urbaine de l’utilisation, les facilités d’accès à divers types de zones urbaines et la proximité de voies de communication importantes pourraient jouer un rôle prédominant.


Valor de la tierra agrícola y crecimiento urbano

El estudio de la dinámica del mercado de la tierra ha puesto de manifiesto durante algún tiempo que el valor de los terrenos depende de varios factores económicos y no económicos distintos y que hay muchas personas que intervienen en la venta de tierras que no están relacionadas con el sector primario. La presente investigación tiene por objeto verificar qué factores determinan el valor de la tierra en un ámbito territorial en el que influye fuertemente el efecto urbano, el de la zona metropolitana de Padua, Italia. Hay factores típicamente agrícolas, como la fertilidad del suelo, la presencia de cultivos característicos y la disponibilidad de agua para riego, cuya importancia es secundaria a la hora de determinar el valor del terreno. Pueden adquirir una función predominante variables como el destino urbano de la utilización, la posibilidad de acceso a diversos tipos de zonas urbanas y la cercanía de rutas de comunicación importantes.


Introduction

The study of land market dynamics has shown for some time that the value of land is related to a number of different economic and non-economic factors and that many people involved in land sales are unconnected with the primary sector (Grillenzoni and Grittani, 1990). The value of a plot of land is now affected not only by agronomic characteristics (soil fertility, supply of fixed assets, size) but also by many other factors such as distance from urban areas, vicinity to services, the road network, etc. This situation involves a modification of market mechanisms and, in particular, a transition from a purely competitive market towards other forms such as oligopolies and monopolies.

The demand by different land uses also includes all the non-farmers who consider land as good protection against the loss of purchasing power of money. Added to this is the community’s altered conception of land, which is no longer traditionally considered as a production factor but rather as a consumer good. All these considerations help explain the wide variability of prices that characterize the land market, even in the case of similar plots sold during the same period (Di Sandro, 1972).

Studies have been carried out to analyse the relationship between property values and landscape-environmental characteristics with the aim of determining how environmental quality can influence prices (Randall, 1987; Pearce and Markandya, 1989). In general, the trend in land values is related to the demand for types of land use, which falls into three categories: agricultural production, residential and other uses.

A particularly important influence on land values is that resulting from urban planning, which determines the type of use to which a plot of land is designated. Furthermore, through zoning and forecasts relating to the road network, territorial plans can indirectly encourage a change in land values, as they may reduce accessibility to urban areas. According to the economic spatial models elaborated by Von Thuenen and Christaller, the price of a plot of land is profoundly affected by the costs of access to central areas. Urban plans can also contribute to variations in land values, both directly (indicating the type of activity that can be carried out) and indirectly (modifying access costs to central areas and encouraging the spread of building).

Major fluctuations in terms of land value are usually in areas where the urban plan provides for significant changes in the destination of use, for example from agriculture to urban expansion. The impact that changes in the destination of use have on land values can be determined quite simply: the differential of the value depends on the difference between land rents attainable before and after the change of use. Identification of the indirect effects is much more complex in the particular case under study (Padua, Italy), especially in the zones of the northeast where a pattern of scattered settlements has emerged and where urban growth has progressively incorporated rural areas, often without taking agronomic characteristics into account and thereby altering the land market dramatically. In particular, in the fringe districts between urban areas and the open countryside, the type of land being sold appears to be different from the typical land sales that characterize either areas of definite rural tradition or urban centres.

This phenomenon is seen clearly in metropolitan areas characterized by the wide-based economy and expansion typical of the situation on the Veneto plain, for example, where interaction between the urban and agricultural systems is deeply rooted (Camagni, 1994). In Veneto, in fact, building development has occurred through the largely uncontrolled growth of numerous small villages which at one time had an essentially rural connotation. In this case, economic development based on the expansion of the city is less favoured than the progressive transformation of small rural villages into urban areas, generally of modest dimensions, integrated into the countryside. This has often involved the disappearance of the hypothetical dividing line between built-up areas and farmland, thereby transforming the entire territory into an urban-rural continuum.

Within a similar context the land market is characterized by a wide variability of prices depending on the expectations and potentials linked to the single plots of land. This article is aimed at verifying which factors determine land values in the metropolitan area of Padua, Italy, a territorial context that is deeply permeated by the urban effect. It can be hypothesized that, in such a setting, typically agricultural factors such as soil fertility, the presence of crops and the availability of water for irrigation are now of secondary importance in determining the value of land. On the other hand, variables such as urban destination of land use, accessibility to various types of urban areas and vicinity to important communication routes could assume a predominant role.

Survey methods

It has been recognized for some time in Veneto that there is a lack of information on the main factors characterizing the local land market, there being no service for data collection and no database.

Conseqently, in an attempt to increase the knowledge of land market trends in this rural area with a high urban incidence, a study was done of transactions of rural land plots in the metropolitan area of Padua. Data relating to 81 sales were gathered in the six communes belonging to the first and second metropolitan belts around Padua.

The choice was motivated by the fact that this area fully explains the more turbulent rural land market. The communes that form the first and second rings, in fact, have recently been subjected to heavy building development which has partially overrun the rural area. Many of the communes studied are characterized by a territory divided into various districts, and this has contributed considerably to the increasing variability of market conditions. The study covers the period between 1990 and 1995, during which the largest number of sales were concentrated in the last two years.

To learn the actual selling prices, and consequently the real value, of rural property, a survey was done partly by questioning estate agents and partly by directly consulting the people involved in the transactions. It is well known that, to reduce the duties payable, the value declared in the deed of sale tends to be much lower than the real value, two exceptions being when the right of pre-emption is exercised and when the parties involved are companies that are required to present an annual balance sheet (Fratepietro, 1990).

As well as the appropriately deflated1 selling price, information has been gathered to distinguish in detail the type and condition of the rural properties sold.

These variables belong to four main categories: agricultural production characteristics, urban area (actual and future), landscape-environmental aspects and access. The production characteristics of the land sold that have been singled out are the surface area; presence of irrigation; form of management, essentially either family farm or non-farm activity; and agronomic quality of the soils, divided into three classes. The existence of any buildings, habitations or outbuildings was also surveyed and their respective cubic measurements taken. Finally, any constraints on the land were identified, particularly rights of entry related to methane gas supplies, power lines, aqueducts or military facilities.

There were three main types of possible access to the land from the local or provincial road network: via a road front, dirt track or field end. Obviously the different types of access to the land influence both the costs of agronomic practices and the possibility of building. For many reasons it can be hypothesized that the latter tends to influence the value of agricultural land more than the former.

With reference to urban aspects, for each property sold the homogeneous territorial zone (HTZ) defined by the Master Plan (MP) in force was specified. In the cases where the MP was in the process of being revised, an attempt was made to identify what the future HTZ would be. A margin of uncertainty obviously exists in defining the latter parameter since, between the planning phase of a variant to the MP and its final adoption, significant modifications of the zoning initially proposed can be introduced.

As well as the different "urbanistic type" characteristics, two variables which take into account the presence of a constraint of destination for public open spaces or car parks and the strip of protected land bordering rivers and graveyards have also been considered. Finally, the location was also indicated of plots falling within the confines of the Medio Brenta, as defined by the Regional Territorial Coordination Plan of Veneto, and the Bacchiglione (proposed by the Provincial Territorial Plan of Vicenza).

Attention was also paid to the landscape-environmental characteristics by surveying any elements such as natural areas, rivers and parks close to the rural land sold that would be able to improve the environmental setting and, at the same time, the presence of quarries, dumps and other factors that, on the contrary, could reduce the quality of the setting.

The sites of the rural plots were thoroughly analysed both in relation to their distance from major towns and with respect to the main services. The distance was therefore measured not only from the provincial capital, but also from the local town and nearest inhabited district. To complete the picture, the study considered the land’s location in relation to hospital, bank and railway services, motorway access points, schools and the nearest artisan/commercial zone.

Characteristics of the study sample

The property transactions surveyed involved a total surface area of 1 693 522 m2, with an average surface area of 20 907 m2. The dimensions of the single plots sold vary from a minimum of 100 m2 to a maximum of 243 300 m2. Despite a slight variability, many of the plots were less than 6 000 m2 (42 percent) and, of these, about 30 percent were smaller than 3 000 m2.

Agronomically, the soils are characterized by a good or reasonable level of fertility, apart from 6.2 percent that are considered of low productivity. The practice of irrigation is not very widespread, being regularly carried out on only 16 percent of the land. Tree crops are fairly irrelevant, either as regards orchards (only one case) or vineyards (7.4 percent). The sizes of the vineyards are also modest, occupying a small fraction of the land being sold. From an agricultural point of view the sample can be considered sufficiently representative of the reality in the central and southern Padua plain, where there are few vineyards or orchards and the soils are generally very fertile, although they are not served by fixed irrigation systems.

An interesting piece of data emerges from analysing the form of management, since most of the rural land was found to be managed prevalently by people not belonging to the primary sector (85.2 percent), while the remainder appears to be entirely composed of family farms. This is in line with the findings of a survey carried out in the Euganean Hills area, i.e. in recent years the trend has been for properties of land to be transferred from non-farmers to farmers (Tempesta, 1995).

On some plots (18.5 percent) there are buildings, both habitations and outbuildings, that tend to be in a fairly poor state of repair and whose volume generally does not exceed 900 m3. Various types of constraint hamper the use of 23.5 percent of the rural land, the most widespread of these constraints being rights of entry (12.3 percent). Regarding modes of access to the land, 71.6 percent of the plots may be reached directly from the local or regional road network, 24.7 percent by dirt track and only 3.7 percent across field ends.

Taking urban aspects, according to the Master Plan in force, the plots of land sold are mainly classified as zone E and are not encumbered by any urban or landscape constraints (55.5 percent), while 7.5 percent is rural land sited in zones with different urban destinations (in particular B, C, D, F). Moreover, in 10 percent of the plots sold, changes in the destination of use are planned following urban variants now being established but not yet definitively approved. Generally these plots will be included in zone E, except in one case where a commercial area (D) should be built. About 22.2 percent of the land lies within the confines of regional or provincial parks and 5 percent of the properties are situated in strips of protected land bordering graveyards or rivers. The study sample therefore includes a wide and exhaustive panorama of the principal urban conditions found in rural areas, referring both to the homogeneous territorial zones indicated by the Ministry of Public Works decree of 2 April 1986 and the other landscape-environmental constraints contained in law 431/1985 and the Veneto Regional Territorial Coordination Plan.

As mentioned above, with the aim of quantifying the incidence of the urban effect on land values, the distance of the plots was measured from both towns and the major road network. Most of the land (88.9 percent) is within 15 km from the centre of Padua and is consequently located in the communes of the first or second peri-urban belt. About three-quarters of the land is less than 1 km from the nearest village.

The sample can therefore be considered representative of the vast metropolitan area that extends between Padua, Venice, Treviso and Vicenza. The pattern of settlement of central Veneto has historically been characterized by the widespread presence of both scattered houses and small rural villages. Strong economic growth in the 1970s and 1980s led to the reinforcement of this pattern of settlement so that most rural villages have by now assumed urban characteristics, both in terms of types of buildings present and supply of services.

Consequently, industrial/artisan/commercial areas are also very diffused. It is therefore not surprising that 81.5 percent of the plots surveyed are less than 4 km away from the nearest commercial/industrial area, and 30.9 percent are less than 2 km away. The position with respect to the nearest bank branch is similar, with 80.2 percent of plots sited within 4 km. There is also a school in the immediate neighbourhood of the rural plots, with 80.2 percent being at a distance of less than 3 km and 40.7 percent at even less than 1 km. The nearest hospital is situated at a distance varying between 3 and 15 km, this being either Padua’s general hospital or the hospital at Camposampiero.

Regarding transport services, 71.6 percent of the rural properties are less than 1 km from the nearest bus stop, while only 19.8 percent are less than 0.5 km away. Railway stations and motorway access points are less convenient, since in both cases most of the land sold (76.5 percent) is situated at a distance of more than 5 to 6 km.

A final set of results are based on the analysis of the landscape-environmental aspects that characterize the rural plots sold. Taking elements that can reduce environmental quality, only a fraction of the land examined (4.9 percent) is situated near quarries or dumps. The aspects that broadly improve the environmental characteristics of a plot present a different picture. In 18.5 percent of cases, there are elements of a particular landscape-environmental value, such as natural areas, green spaces and parks. Finally, 32.1 percent of the plots of land sold are near rivers.

Land values

The sums agreed in the sales are extremely variable, passing from a minimum of 2.4 million Italian lire (Lit) to a maximum of Lit 4 billion. Obviously, the price per square metre of land differs profoundly on the basis of the urban zone in which it is located as well as by the presence of any buildings. The average price of land without buildings in zone E is around Lit 70 million/ha, while the price rises notably, exceeding Lit 240 million/ha when there is a habitation or outbuilding, even if it is not in very good condition.

These values are much higher than those found in a research project in the early 1990s in rural areas of the Padua plain outside the metropolitan area (Tempesta, 1995), a project that found average prices of land without buildings to be less than Lit 50 million/ha (in 1995 lire).

This discrepancy can mainly be attributed to high building trade earnings also affecting land classified as agricultural in the current urban plans. In fact, constraints that could in some way lessen the possibility of building (e.g. the establishment of a park) tend to reduce the value of land without buildings considerably to less than Lit 60 million/ha. It can be noted, however, that exactly the opposite happens for plots with houses or outbuildings. In this case the average selling price of plots in a park area is higher, although only slightly, than that of plots without this sort of constraint.

The creation of a protected area therefore has a basic redistribution effect on land values, as a reduction in the land’s building potential determines a shift in the demand for agricultural land for building purposes to the lots already built on.

The presence of a building also translates into a substantial reduction in the differential between values of areas that can be built on and those of rural land. In fact, the price per square metre of a plot with a construction index of between 1 and 3 m3 per m2, the maximum and minimum values from art. 23 of R.L. 61/85 for in-filling zones, varies on average from Lit 73 000 to 138 000/m2, the same prices as those found in urban areas. It can therefore be inferred that the whole metropolitan area, independently of urban destination, is included in the demand for areas that can be built on.

In other words, the market makes no distinction between urban zones, but refers only to the building possibilities of the land as defined either by the cubic measurement indexes established by the Master Plan or by the presence of a building. Moreover, renovating and extending existing buildings involves a considerable reduction in urbanization charges, which are 20 percent of those of new buildings. These factors mean that the purchase of rural buildings can be of particularly good value, for many reasons other than landscape and environmental considerations (R.L. 61/85, art. 82).

The purchase of a rural plot of land with buildings can therefore be seen as being of good value even when the state of repair is fairly bad, since it is not the building itself that is being paid for but the building potential of the plot.

More specifically, regarding land already built on in zone E, the data acquired demonstrate that numerous other factors can affect the selling price. In the first place, the values of land vary quite considerably depending on the size of the plot. In fact, the highest prices are found for dimensions of less than 3 000 m2 (Lit 8 441/m2), while the prices of larger surface areas are about 20 percent lower. This phenomenon is a consequence of the function of demand for rural plots that tends to favour small plots, the purchase of which is also possible for many small farmers who have a modest capacity for accumulating capital. This segmenting of the function of demand is attested to by the effect of the presence of buildings on the value of the land, which appears to be relevant only for the small plots. The demand for small plots with buildings is a typically urban factor and this obviously reflects on the selling price.

The agronomic quality of the soil does not seem to influence prices very much, while the possibility of irrigating the land seems to be of some importance. The value of irrigated plots is 18 percent higher than the value of unirrigated plots.

The effect of the characteristics of the owner of the rural plot is also interesting, as the highest prices have been obtained by vendors who are not part of the rural world, thus demonstrating their better bargaining capability. The presence of constraints such as rights of entry does not seem to have any uniform influence on land values.

On the contrary, a significant element in forming the price is the accessibility of the land. The plots without buildings, facing the road, have a 70 percent higher value than those reached by dirt tracks or across field ends. This discrepancy should not be attributed to the lower costs for cropping operations, but rather to the higher desirability for non-agricultural uses of land that fronts the road and is therefore easily reached. The road network characteristics therefore appear to assume a central role in favouring the penetration of land rent in rural areas.

In summary, analysis of this first set of agricultural production variables reveals that the typically rural nature of a plot of land does not seem to play a primary role in forming the selling price. This appears to be confirmed by the importance assumed by a variable such as the type of management of the plot, which is a decisive element in determining the value to people from outside the rural environment.

According to the models elaborated by Von Thuenen it is the presence of phenomena of demand polarization that determines the onset of differential rents and therefore diversification of land values on a territorial basis.

It is recognized that Von Thuenen’s model is an oversimplification of what actually happens since there are many factors of demand polarization. Nonetheless, identifying the central locations capable of determining the forming of the rent differential is a very complex process, as the demand for land arises from many needs (building and otherwise) and the land market also deviates considerably from models of free competition. Therefore, with efficient territorial planning, the phenomena of building rent would have to be very limited in agricultural areas on the plots without buildings. On the contrary, with relatively unrestrictive territorial policies, urban land rent tends to include agricultural land as well. In the latter (more realistic) hypothesis, the value of agricultural land will also be affected by the presence of localities able to polarize non-agricultural demand.

It is consequently interesting to relate the values of agricultural land to some possible sources of polarization of the demand formed either by towns of various sizes offering many types of services or by single services. The distance from the centre of Padua does not seem to exercise any particular influence on the formation of the selling price, independently of the presence of buildings. Similarly, the distance from the city centre does not appear to affect the value of agricultural land.

At present, therefore, the formation of urban land rent is no longer due to the presence of a large central town. On the contrary, the rents are now determined by the position with respect to areas destined for particular uses or to smaller urban areas. It is shown, for example, that the distance from the nearest commercial and/or industrial area influences the selling price. In particular, for plots without buildings the highest values are in the immediate vicinity (Lit 8 148/m2 at less than 2 km), while they gradually decrease as the distance increases, almost halving at distances of more than 6 km. The same can be said for distance from the nearest village. The plots furthest away cost almost Lit 18 million/ha less than those in the immediate vicinity.

Regarding the distance of services, the influence of the location of the plots with respect to a bank is clear. For distances of less than 2.5 km the selling prices of land with buildings are around Lit 32 500/m2, dropping as the distance increases. The selling prices of land that is not built on do not fluctuate, remaining at Lit 6 000 to 7 000/m2. The distance from a school does not seem to influence the selling price of land, either with or without buildings.

A significant element in determining the price seems instead to be the distance from motorway access points. For distances of less than 5 km, taking land with or without buildings, the plots are sold at higher prices (Lit 45 086 and 7 289/m2, respectively) while they diminish as the distance increases.

Passing to the landscape-environmental aspects, the vicinity to areas of a particular nature interest value (parks, green spaces, etc.) helps raise the prices of plots with buildings, while it appears to exercise the opposite effect on plots without buildings. This is obviously in line with what has already been observed in the ratios between landscape-environmental constraints and land value. The influence of the vicinity to rivers is clear, especially in plots with buildings, where the presence of waterways involves an increase in value of about Lit 8 000/m2.

Vicinity to dumps obviously has a negative effect, determining a notable decrease in the selling price, which drops from Lit 27 500 to 5 400/m2 for plots with buildings and from Lit 6 800 to 4 500/m2 for those without buildings. Vicinity to quarries is not as uniform in determining the selling price.

An interpretation model of land values

Analyses done previously, being based mainly on univariate statistical approaches, give only rough indications of the factors that affect the value of land in metropolitan areas. To overcome these limits, following the proposals of other authors (Grillenzoni and Grittani, 1990), a stepwise regression analysis was done using both linear and double-log models. Double-log models generally interpolated the surveyed data better, having proved capable of providing an interpretative framework which is much more convincing in terms of economic theory.

Using stepwise analysis, the method allows models to be selected that can be considered optimal from the statistical point of view but not necessarily from the theoretical viewpoint. It does not seem sensible, therefore, to adhere strictly to the models as they are selected by the statistical programme. They should be interpreted in a wider sense, with verification of any effect of exclusion or insertion of one or more of the possible predictors on the characteristics of the model.

In this analysis three models were produced, referring to:

A) all the sales analysed;

B) sales of plots situated in an agricultural zone for which there is no planned change in destination of use;

C) sales of plots without buildings situated in an agricultural zone for which there is no planned change in destination of use.

By means of these three models it was possible to clarify the factors that could contribute to forming the prices of land in a more articulated way.

A first piece of data emerging from the models is that the value of the plots of land tends to diminish as the surface area of the plot sold increases. For example, from model C relating only to agricultural land without buildings, it can be deduced that the price per square metre of a plot located 2 km from the nearest industrial or artisan area, with good access and not situated in a park, varies from Lit 90 million to 60 million depending on whether its dimensions are 1 000 m2 or 5 ha, respectively. Similar results can be obtained with the other two models.

This effect is considerable passing from very small plots to others of 2 to 2.5 ha, above which the values remain much more stable. It is therefore confirmed that the dimensions of the plots play an important role in forming land values, as they determine a net separation of the different sections of demand in the land market.

Second, analysis of the three models shows that the factors that mainly influence the value of land in the metropolitan area of Padua are those given in the above paragraph. Model A clearly emphasizes the importance of urbanistic choices in forming land rents. All other factors being equal, the change of destination of use determines a 2.5 to ninefold increase in land value depending on the type of urban zone planned. The biggest increases are in areas of residential expansion and in-filling while those in the artisan and commercial areas are smaller. It is also interesting how plans for change of destination of use backed by an urban variant in progress have considerable effects on the values, although much less than those found once that variant has been approved.

It must be emphasized that this is a question of indicators that are clearly affected by the characteristics of the plots surveyed, since, as seen before, sales relating to land in non-agricultural areas have decreased. Notwithstanding this, the model provides an orientative order of size of the possible effects of urban choices on the price of land, allowing the estimate obtained through analysis of average market values alone to be refined.

All the models stress the importance of access in the formation of land prices. The regression coefficient of the access variable is also very similar in all the models. The plots sited along major roads or local roads cost 55 to 60 percent more than those with poorer access. Once again it appears that the road network is in many ways the principal means by which urban prices penetrate into agricultural areas.

Another element that appears in all three models is the vicinity to industrial and commercial zones, which appear to be the central locations able to generate phenomena of rent. It is clear that the phenomenon of rent generated by non-agricultural production areas benefits houses, either of the urban type or scattered rural housing. In many ways it can be maintained that housing is the true receiver of the benefits that lead to price formation in metropolitan areas.

Although in all the models the commercial and industrial areas have proved to be better correlated to the price variable than the distance from other localities or from particular services, the phenomenon is much more complex in reality. Since the distances between different types of urban areas or possible services are often correlated, because of the possibility of colinearity phenomena, the models have favoured the best correlated variable. This obviously does not mean that rent formation can be attributed solely to the distance from non-agricultural production zones. It is, in fact, particularly difficult to overcome the problem of colinearity within regression analysis, and obtaining a model that can take into account the role of all the factors able to generate rents is therefore problematical. In many ways the regression coefficient obtained tends to overestimate the real role played by industrial and commercial zones in forming land prices in the metropolitan area of Padua. However, these zones undeniably play an important role, albeit difficult to define.

The two models relating to the sales of land with buildings (A and B) always include the cubic measure index, which has been revealed as one of the variables that influence the value of land most. The phenomenon is particularly evident in sales of fairly small plots which, the construction index being equal, generally present values very similar to those of urban land.

In the case of model C, relating to agricultural land without buildings, it is surprising that the true agronomic variables have not entered the model. Even in the more properly agricultural plots it is the variables that can influence the possibility of building that are better correlated with the selling price. As well as the effects of access and distance from industrial and commercial zones, it has emerged that two further factors capable of holding down the value of agricultural land are nearness to dumps and location in park areas.

Vicinity to a dump has a greater effect than that of poor access. It is clear that being close to dumps almost totally eliminates the building suitability of the land, at least from an urban residential point of view. This allows the effect of the urban land rent on agricultural land in metropolitan areas to be estimated. If the value of a 2 ha plot of land, sited near an industrial or commercial area and with good access, is estimated with model C to be about Lit 77 million/ha, the value of a plot of the same size situated 9 km away, near a dump and accessible by a dirt track or across the end of a field, would be about Lit 28 million/ha. While not disregarding
the fact that vicinity to a dump and lack of easy access can also lower the agricultural value of the land, it can be estimated that the maximum value of the urban land rent would be about Lit 40 million to 50 million/ha, tending to decrease as the distance grows from some central localities, such as non-agricultural production zones or poorly accessible areas. Regarding this, the value of the land rent consequent to a value of
Lit 28 million/ha of farmland corresponds to an amount varying between Lit 550 000 and 850 000/ha/year, assuming an interest rate of 2 or 3 percent, and this can be considered very consistent with the real earnings of main field crops on small farms in the area.

Finally, in the models obtained through stepwise regression, variables relating to the main factors affecting farm produce earnings, for example agronomic quality, the availability of irrigation water and the existence of constraints, are absent. This does not mean that these variables cannot have a role in forming the price of agricultural land. Their absence from the proposed models indicates that they can only be accountable for a small fraction of the price variability, so the method of selecting the variables of the multiple regression function tends to exclude them in favour of the variables that are better correlated statistically.

Conclusions

This article has given an insight into the mechanisms that form agricultural land prices in metropolitan areas. The availability of a wide and composite sample of land sales characterized by different situations from the urban, agronomic and territorial viewpoint has allowed the effect on the selling price of a wide range of factors to be analysed. The picture that has emerged is in some way surprising. In fact, using both simple approaches of univariate analysis and stepwise regression methods, all the metropolitan agricultural areas are included in phenomena of urban land rent.

Access to the rural land plots, the presence of buildings and distance from non-agricultural production areas have emerged as the main contributing factors in the formation of agricultural land prices. They are, understandably, elements that spotlight the prevalently urban nature of the demand for land in metropolitan areas. This is bolstered by the fact that all factors that can decrease the possibility of building (e.g. the presence of regional parks, strips of protected land bordering rivers and graveyards) contribute markedly to reducing the price in these areas.

This emphasizes first the total inadequacy of the current urban instrument for defining a clear separation in the destinations of use of the territory. In Veneto, the regulations on rural building allow people unconnected with farming to build in agricultural areas. According to Veneto legislation, it is enough to buy a surface area of 6 ha of arable land to be able to construct a house of 600 m3, with outbuildings that can in theory cover up to 3 000 m2. Moreover, many rural buildings are now obsolete and redundant for the needs of cropping or livestock rearing.

Centred as they are on the systematic recourse to variants of the territorial plans and on creating areas for residential or production expansion (zones C and D) in practically all districts of the commune, the urban procedures of most Veneto communes have further increased the expansion of urban land rent in the territory.

The scattering over the countryside of commercial areas and of houses occupied by people working in non-agricultural sectors has led to a considerable demand for infrastructure development in the rural area itself. By reducing the travel time necessary to reach areas with urban type services, the systematic improvement of the road network in agricultural areas has been shown to be a powerful instrument for extending urban land rent into cultivated areas.

Currently, within metropolitan ambits it can be confirmed that the market has decreed the definitive disappearance of what was at once termed the dualism of town and country. In many ways, in central Veneto there is now a sort of "rural town" or "town scattered over the territory" in which many factors can influence the value of the areas. It follows that land values can undergo sudden changes even in neighbouring plots of land. Evidence of this is that the central areas in a strict sense (e.g. the main city of the province or the local town) are no longer alone the sole determinants of the increasing rent differential, as this is now also influenced – and maybe to a greater degree – by numerous small urban centres such as villages and districts that offer some basic services or industrial, commercial and artisan areas.

Which instruments might allow the administration of a territory within this type of context and what objectives must be pursued with their use? It seems certain that the usual urban instruments do not appear, or appear only marginally, to influence development of the territory through building. Further, there are now doubts that it is possible to control, with traditional urban instruments, the evolution of such a scattered town that is subject to sudden technological change. It is essential for the definition of new instruments to pass through an attentive definition of the intended objectives in management terms. It is clear that, beyond the sterile and outdated ideological counterpositions, urban area management must be restored to the maximization of community well-being and sustainability of the territorial changes.

Rather than trying at all costs to resist rent formation with ever more complex systems of constraints, it would be useful to adopt the conceptual instruments typical of environmental economy whereby, within set limits, urban area management would be controlled according to the non-profit standards that benefit those who generate negative externalities against the community. Within this context, clearly defined property laws and an adequate tax system could favour a redistribution of the rent among the entire community, reducing the more negative aspects at the same time.


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Notes

1 Since it is difficult to identify a correct deflator for land values, it was decided to use the wholesale price index as other authors have done (e.g. Rosato, 1991).



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