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Internal research projects - year 2016

Project No.: 1252

Project title:

The Analysis of Market Price Determinants with a Special Focus on the Role of Buyers in the Czech Republic (Jelínek)

Responsible solver:

Ing. Ladislav Jelínek, Ph.D.

Aim of the project:

The project aims at the identification of the land market price determinants, particularly those that distinguish the buyers´ behavior. The specific objective is to determine which characteristics of buyers have the ability to increase their market power and thus to influence the resulting market price.

Summary of the project:

We have analysed land market imperfections in the Czech Republic, that leads to sub-optimal land allocation through which buyers receive the land for the price lower than the market optimal (maximal achievable). We have hypothesised that this divergence from the optimal local market price results from the market imperfections that are given by the historical land use relations, dominant large-scale farming and by the slow implementations of market institutes in transformation.
The difference between real price and maximal achievable is estimated to some 30 ths. CZK per hectare in 2008-14; the amount that would sellers otherwise receive if no information asymmetry is presented. It was found out, however that agricultural buyers could capitalize their information advantage in receiving lower price – the advantage that has weakened over years. Analogously, with higher land quality, the price advantage resulting from information asymmetry is eliminated and bargaining potential for both parties disappear.
There was not found any price-gap for non-agricultural buyers as regards plots in urban centres proximity. On the contrary, the agricultural investors are capable to receive such land nearby urban areas for a lower price due to their negotiation position.
The study neither support the hypotheses that non-agricultural investors generally dominate to land sale market and buy the land for significantly higher prices than other groups of buyers.

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