Urban influences on periurban farmland prices

In periurban belts, landowners expect agricultural parcels to be converted to urban use and so farmland prices fall with distance from cities, owing to premiums reflecting potential capital gains from such future development. This is shown, first, by analysing residential and agricultural land prices via a theoretical microeconomic residential location model and, second, by an econometric model based on individual transactions with random spatial effects. Results show that farmland prices fall sharply close to the city and then gently further away; premiums for development are decomposed and allocated to several factors and the expected time of urban conversion are evaluated.