Lessons from an examination of property and land usage

Kapronczai, István

Keywords: land ownership, land rental, land market, consolidation of holdings, landed property policy

We conducted an interview-based investigation at the Agricultural Economy Research Institute in 2005, looking at the reaction of producers to changing legal and economic factors. 296 written and 50 oral (so-called „deep”) interviews were carried out with farmers in the course of the survey. The sample represented the close to 100,000 agricultural holdings, larger than 2 European units of land measurement (EUME). The questions related to production decisions in the period 2002-2004. In the context of the investigation we also touched upon the current questions of land ownership, land usage and landed property policy. The study is based on the data and information thus obtained.

Based on an examination of our questions related to land ownership and the price of land, it can be deduced that the land market in Hungary is flat. Land is offered for sale by farms wishing to divest themselves of outlying areas and those that have fallen on hard times. Growth in holdings is principally ensured by farms falling into the less than 2 EUME category. The greatest enthusiasm for buying land can be found among the medium-sized farms. The current regulation of the right of pre-emption leaves a lot to be desired. The bar on legal entities acquiring land ownership rights will cease in the next few years. Thus, the main question is whether it will be possible to introduce a model of regulation, which acknowledges the current status quo, but gives preference to medium-sized concerns without impeding competition.

The rates of Hungarian land rental significantly exceed the EU-15 average and tend towards growth. The dynamism of medium-sized farms’ growth exceeds that of large concerns. The introduction of a minimal rental period and its 5-year determination is justified. It would be practical to raise the withholding tax exemption period for rentals to 10 years. According to the survey results, it is primarily land rental fees that have risen recently and they currently account for some 6% of land value.

Efforts to redistribute landed property in Hungary have brought fairly meagre results and the joint ownership of farms has grown in the past few years. There is a need to develop legislation that promotes the concentration of landed property, which would then encourage an institutional system of land exchange. Accelerating the process of consolidating holdings justifies using governmental fiscal instruments to stimulate voluntary-based programmes of land exchange.

The life annuity for land programme was unsuccessful, both in areas with good site conditions and those important from a consolidation perspective; the handling agency was unable to ensure the land’s development. A revision of inheritance law would also be justified, to avoid further fragmentation of estates.

Codification of new land legislation would only be expedient following the development and consensus acceptance of a comprehensive landed property policy. This could be served by a compromise based on acceptance of favouring individual farms, supporting their federation, and discontinuing the sanctioning of joint ventures by lifting the ban on land purchase. The interests of favoured economic groups could be protected via business regulation.

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