Land for sale? - Elements for comparing prices of agricultural land and expropriation compensation in Flanders and the Netherlands

Dirk Bergen

October 2011

This report aims at providing figures about sales and lease prices of agricultural land in Flanders and the Netherlands and offers elements for comparison of expropriation compensations and associated measures. The information seeks to offer a contribution to objectifying the debate in the scope of the activities in the preparation of the Flemish Parliament Act on 'land-use planning'.

Attention has been paid to the factors that determine the value of agricultural land and the basic principles for establishing expropriation compensations in Flanders and the Netherlands. Said principles are practically identical. They dictate full indemnification and compensation is made on a so-called 'in concreto' basis. This means that each case is specific, which greatly complicates comparison. In addition, there are many differences, some of which neutralise others.

The figures not only focus on the actual value of the sales and lease prices, they also demonstrate the evolution of those prices. This study takes a closer look at the differences between arable land and grassland and at regional variations in sales prices on the Dutch side of the border. Two indicators have been developed: the first involves the sales price/lease price ratio and basically indicates how many years' rent would equal the sales price of arable land. The second indicator is the lease price/sales price ratio, expressed as a percentage, and basically indicates the interest yield for the owner/lessor from the capital invested in the arable land. It should be noted that for the owner, the interest represents but a partial compensation; after all: the owner is simultaneously compensated by the value increase of the land.

With respect to the aforementioned indicators, Flanders and the Netherlands appear to follow the same trend, i.e. that the ratio develops to the benefit of the lessee. This could raise problems in the long run as it would discourage land owners from entering into regular long-term lease contracts. Much depends on the value increase of the agricultural land since this obviously also benefits the owner. A substandard lease price/sales price ratio may prompt lessors/owners to opt for different types of leases (one-year lease; seasonal lease; crop lease) if these promise a higher yield.

For the general evaluation of the differences in expropriation compensation between Flanders and the Netherlands we used an example from practice.

In relation to the expropriation compensation of owned agricultural land it is important to note that almost 85% (for Flanders) to 90% (for the Netherlands) of the compensation concerns the value of the land. This means that a difference between Flanders and the Netherlands is greatly influenced by the market value of the agricultural land. Since average sales prices for agricultural land in the Netherlands are significantly higher than in Belgium (60% on average), the expropriation compensation will obviously reflect that difference. A different scenario applies to the lessee/user who is not the owner of the land. Although the average lease price for a comparable long-term lease of agricultural land is much higher in the Netherlands than in Flanders (70% on average), this hardly affects the compensation for the lessee. However, there is a huge difference in availability of leasehold land between Flanders and the Netherlands: in Flanders almost two thirds of the agricultural land is being leased, against a mere quarter in the Netherlands. As a result it is often assumed that a Dutch lessee will have a hard time finding alternative leasehold land after expropriation. To maintain his production capacity, his only option is then to purchase land. For this reason the Dutch expropriation compensation provides at least six years' interest repayment on the borrowed capital. This results in a considerable difference as compared to a Flemish colleague who, in principle, can count on an expropriation compensation of 0,50 - 0,75 Euros per m2.

The Agricultural Land Maintenance Bureau in the Netherlands structurally purchases these lands for the purpose of either reserving them for certain projects, restructuring them or reselling or releasing them. This provides a solid buffer for providing assistance in expropriations. By contrast, land banks in Flanders usually have regional boundaries and are created on an ad-hoc basis.

In an expropriation procedure, associated measures can be taken to facilitate and accelerate the purchasing procedure. The report provides a few examples to this effect. However, a general comparison between Flanders and the Netherlands is not possible at this time: the potentially usable tools are too comprehensive and the specific situations in which they can be used too diverse.

Moreover, expropriation compensations and associated measures do not disclose all the details about the net amount an owner or lessee actually gets to keep after an expropriation procedure. Of significance in this respect is the application (as in Flanders) or absence (as in the Netherlands) of a strict separation of the compensations for owners and lessees, as well as the impact of taxes.

Flanders lacks available and directly usable figures about sales prices of agricultural land. Part of the problem seems to be caused by the distribution of powers with respect to these matters.

Original version:

Dirk Bergen (2011)
Grond te koop? - Elementen voor de vergelijking van prijzen van landbouwgronden en onteigeningsvergoedingen in Vlaanderen en Nederland
Department of Agriculture and Fisheries, Division for Agricultural Policy Analysis, Brussels.

Departement Landbouw en Visserij
Ellipsgebouw (6de verdieping) - Koning Albert II-Laan 35, bus 40 - 1030 Brussel
Tel. 02 552 78 20 - Fax 02 552 78 21