What Moves the German Land Market? A Decomposition of the Land Rent-Price Ratio

Jana Plogmann, Oliver Musshoff, Martin Odening and Matthias Ritter

No 288444, 165th Seminar, April 4-5, 2019, Berlin, Germany from European Association of Agricultural Economists

Abstract: In this paper, we apply the dynamic Gordon growth model to Western Germany and decompose the rent-price ratio into the expected present values of rental growth rates, real interest rates, and a land premium, i.e., the excess return on investment. This analysis reveals that the recent price surge on agricultural land markets was not unprecedented; that the land market rent-price ratio is rather low compared to other markets and varies considerably among federal states; and that (expected) premia for land are mostly negative, rendering investments in farmland unprofitable for financial investors. Finally, we find that changing expected present values of returns on land investments are the major driver for land price volatility.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 24
Date: 2019-04-16
New Economics Papers: this item is included in nep-agr and nep-bec
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Citations: View citations in EconPapers (3)

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https://ageconsearch.umn.edu/record/288444/files/Plogmann-112.pdf (application/pdf)

Related works:
Journal Article: What Moves the German Land Market? A Decomposition of the Land Rent-Price Ratio (2020)
Working Paper: What moves the German land market? A decomposition of the land rent-price ratio (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa165:288444

DOI: 10.22004/ag.econ.288444

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