Zoning change, anticipation behaviour and land value: a case study on overage payments

Arno van der Vlist, Ed F. Nozeman and Terry van Dijk

ERES from European Real Estate Society (ERES)

Abstract: Capitalization effects in agricultural land value of a regional planning design are investigated. A recent case on regional design in which property rights are well-defined is used to theorize on market value of agricultural land in a situation of re-zoning. Our case-study shows that land prices increased rapidly in anticipation of a zoning change which reflects the underlying option value. Legal transfer documents furthermore reveal that overage clauses are agreed upon by parties as well. These overage clauses will be exercised ex post only if the regional design is successfully completed to anticipated zoning and land-use. This finding has important theoretical implications as such overage payments have neither been considered in appraisal standards, nor of compensation schemes in expropriation. Our theoretical stand is that ex-post overage payments while important drivers in bargaining are not part of existing definitions of property value. Our case shows that at odds to international valuation standards these agreed overage payments are nevertheless included by the Dutch Tax Authority in a recent tax claim.

Keywords: anticipation effects; capitalization effect; Land Use Change; overage clause; retrospective-payments (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2017_367

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