Agricultural land prices ballooning
29. 8. 2016 | Source: BusinessInfo.cz
The average market price for agricultural land last year reached nearly CZK 166,000/ hectare, representing year on year growth of 16.5 percent, according to trade server Farmy.cz. What’s more, in the first half of this year, the price grew by a further one-fifth to cross the CZK 200,000/hectare threshold.
“I worry that reason is going out the window and that there are the beginnings of an inflated bubble,” said Martin Pýcha, chairman of the Agricultural Association of the Czech Republic [ZS ČR].
According to Pýcha, huge pressure for the acquisition of farmland coming from nonagricultural investors and, newly, from investment funds, is driving up the prices. Moreover, he added, it is forcing a reaction from farmers who want to themselves purchase land so that in the future they cannot be muscled off it by buyers terminating their leasing arrangements. Currently the investments being made in agricultural land stand at about 50:50 when it comes to the agricultural and non-agricultural groups of buyers. Sharp growth in the land prices has been seen for two and a half years.
Pýcha noted that, paradoxically, while an investment into a company’s shares can improve its economic performance, when it comes to agricultural land an upswing in profitability does not necessarily occur. The ZS ČR head pointed out that this year the weather would mean a worse harvest than last year. “Despite that there is farmland price growth because those who are buying are not acting because of the profitability that can be achieved with farming, but because of expectations surrounding further price growth,” he added.
Though agricultural land prices have been growing year after year, the tempo of the growth is accelerating.
Originally published in E15 weekly, economic and business newsmagazine. Author: Dušan Kütner