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Recent Trends in Agricultural Land Prices in South Africa: A Preliminary Investigation Using Cointegration Analysis

Ajuruchukwu Obi and Herman D. van Schalkwyk

No 25234, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: The main objective of this paper is to report preliminary findings on the recent trends in agricultural land prices in South Africa against the backdrop of growing concerns over their rising levels. Given the important role of land prices, the impact such increases would have on significant national development efforts, including the on-going land reform programme and other aspects of agricultural restructuring, provide strong justification for this investigation. The cointegration approach was employed within a framework that allowed for both long-run and short-run dynamics of the relationships to be identified. Building on previous structural modelling of farmland prices in the country, and using much expanded time series spanning forty-nine years, it was possible to establish some patterns of causation in the relationships between farmland prices and a range of macro-aggregates, including interest rate on debt, the rate of inflation, Gross Domestic Product, among others. Although the important role of foreign buyers is suggested by some of the results, there is need for further studies on this subject, using alternative data sets. The finding of a Granger causality relationship between farmland prices and GDP is interesting to the extent that it reflects buying power and confirms impressions about the crucial role of farmland prices in national economic management and the successful implementation of the on-going agrarian reforms in South Africa.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 16
Date: 2006
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DOI: 10.22004/ag.econ.25234

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