The concept of studying the impact of legal changes on the agricultural real estate market

Land Use Policy 86 (2019) 229–237

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Land Use Policy journal homepage: www.elsevier.com/locate/landusepol

The concept of studying the impact of legal changes on the agricultural real estate market

T

Cezary Kowalczyka, , Magdalena Nowakb, Sabina Źróbeka ⁎

a b

Institute of Geospatial Engineering and Real Estate, Faculty of Geodesy, Geospatial and Civil Engineering, University of Warmia and Mazury in Olsztyn, Poland Institute of Geography and Land Management, Geospatial and Civil Engineering, University of Warmia and Mazury in Olsztyn, Poland

ARTICLE INFO

ABSTRACT

Keywords: Agricultural policy Spatial analysis Real estate market dynamics Agricultural real estate prices

The main aim of this study was to identify the direction and dynamics of changes in basic parameters describing the real estate market in Poland and to identify the causes of the observed changes in its legal environment. The changing regulations concerned, among others, the field of trade in real estate and cost-effectiveness of running agricultural activity, particularly factors affecting the supply and demand of agricultural land. The authors proposed a new indicator referred to as the change rate indicator and verified its usefulness in research of this type.

1. Introduction Land is the source of industrial and energy raw materials, as well as the place for agricultural and industrial production. The importance of agricultural land changed depending on the significance of farming in national economy (Przychodzień, 2015). For centuries, Poland has been regarded as a typical agricultural country. However, over the last few decades, the structure of land use in Poland has undergone significant changes, mainly due to dynamic civilisation and technical progress. It was observed that the demand for land can be satisfied only through land transfer between individual sectors of the economy and a change in their intended use (Górska and Michna, 2010). This structure also reflects social and political changes, which caused cities to grow at a fast rate and increased the number of developed areas (Źróbek-Sokolnik et al., 2017). Agricultural land was acquired by various subjects who changed its intended use. This is because the locational aspect (resulting from the perception of a profitable investment in agricultural land) as an alternative financial investment has been increasingly often indicated [Ciaian et al., 2012]. The changes in Poland intensified after 1989, in the period of political transformations. People living in the countryside and running family farms moved to towns and started new lives there. In consequence, the area of farmland decreased and, surprisingly, the area of forests increased (Castle and Hoch., 1982; Algieriab et al., 2017). The direction and dynamics of changes in agriculture in many countries, including Poland, was significantly affected by European integration

⁎

and the implementation of common agricultural policy instruments (Latruffe and Le Mouël, 2006; Latruffe et al., 2008; Střeleček et al., 2010; Marks-Bielska, 2013). Although Poland became a member of the European Union (EU) in 2004, the satisfaction of accession conditions concerning various political, social and economic levels, started many years before that date. EU membership forced an adjustment of Polish laws, including regulations pertaining to rural areas. At that time, a series of legal acts were issued, also by amending the existing ones, controlling various spheres of lives of Polish citizens, including the management of agricultural land (Act, 2003), its sale and protection. Those factors led to changes in the structure of agricultural farms, changes in the structure of land use and resulted in accelerated development of the agricultural real estate market (Hardie et al., 2001; Deegen and Halbritter, 2018). Firlej and Kubala (2018) showed that in EU countries there was a significant correlation between agricultural land prices and the value of direct payments and the value of gross domestic product per capita. 2. The aim of the research, hypothesis and methods applied The authors of the article analysed the agricultural real estate market in Poland from 2000–2016. The beginning of the research period precedes the date of Polish accession to the European Union, while its end was determined by the availability of data necessary to conduct the analysis. The general property market definition is: the buying and selling of land and buildings (Dictionary, 2019). However, scientific research

Corresponding author. E-mail addresses: [email protected] (C. Kowalczyk), [email protected] (M. Nowak), [email protected] (S. Źróbek).

https://doi.org/10.1016/j.landusepol.2019.05.012 Received 9 March 2019; Received in revised form 25 April 2019; Accepted 6 May 2019 Available online 11 May 2019 0264-8377/ © 2019 Elsevier Ltd. All rights reserved.

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perceives the market not only as a mechanism for resource allocation but as all conditions under which rights to real estate are transferred and agreements setting out mutual rights and obligations related to the possession of real estate are concluded (Kucharska-Stasiak, 2006). A shift in emphasis to the conditions of concluding a transaction reveals the dependence of both supply and demand on regulations, habits and the political situation as well (Czyżewski et al., 2017). It should be noted that the real estate market is characterised by considerable public interventionism. This means that the public sector affects the behaviour of the market participants through a variety of legal instruments. In Poland, the adopted study period of 2000–2016 was characterised by significant changes in the legal environment of the real estate market. Due to the unique features of real estate, such as location stability, diversity, durability and strong links with a particular area, the competition in the real estate market is mainly local, but also regional and national in nature (Wilkin, 2014). This particularly applies to the agricultural real estate market. If legal provisions of a particular country are under the influence of international regulations, they can also significantly affect the activity of the market (Swinnen and Vranken, 2009; Wilkin, 2015). The results of the analysis conducted by Laskowska (2014) confirmed that the Polish accession to the European Union was one of the main drivers of change in the agricultural land market, consisting in the growth rate of the market and land prices. This phenomenon is also observed in the other so-called "newcomer" countries in the structure of the EU. On the other hand, the agricultural real estate market has not yet become global. The use value of real estate is mainly determined by its physical (Feichtinger and Salhofer, 2013) and locational characteristics (Drabik and Rajčániová, 2014; Bell and Irwin, 2002; Wu, 2001). By their very nature, they are long-term (e.g. the type of soil, quality classes of agricultural land, soil stoniness, location in relation to sales markets) and have a similar force of the impact on their market prices. For these reasons, the decisions taken by market participants and, consequently, the demand, supply, and prices of agricultural real estate are under major impact of the conditions accompanying the exchange processes in which the market participants’ decisions are taken. Polish literature also distinguishes between the factors determining price levels. This impact is uneven. Some factors have a greater impact than others (Foryś and Putek-Szeląg, 2008; Pietrzykowski, 2011). Irrespective of spatial diversity, prices change over time as well. Many authors have studied the significance of other factors affecting land prices, such as income generated by a farm (Alston, 1986), the system of subsidies for agricultural land and agricultural production (Duvivier et al., 2005; Kołodziejczak, 2015; Swinnen et al., 2013), structural changes in agriculture (Pyykkönen, 2005) and freedom to market (Marks-Bielska and Lizińska, 2015). Most of these price-differentiating factors are either a direct or indirect effect of legal regulations that exist or are expected to be implemented in the near future. These factors, due to changing regulations (legal environment of the market), are variable. The main aim of the study was to identify the direction and dynamics of changes in the basic parameters of the agricultural real estate market and to attempt to find and explain the causes of the observed changes through an analysis of changes in its legal environment. The analysis covered the domestic market (Poland), which is also under the influence of the external situation, particularly that related to the accession to the EU. Hence, the paper contains basic market information on selected European countries, both those which became EU Member States before Poland did and the new ones. In order to describe the market activity, output data concerning the parameters being most frequently quoted in the literature were collected (Marks-Bielska and Bieniek, 2018; Swinnen and Vranken, 2009): the number of transactions concluded, the area of agricultural real estate sold and sales prices. They were recognised as good measures of the situation prevailing in the real estate market. As a basic assumption, the study adopted the thesis that legal

provisions in force in a particular country and at a particular time have an impact on the condition of the real estate market. The authors formulated the following research hypothesis: the decrease in the global indicator of the rate of changes in basic parameters describing the real estate market indicates the upcoming changes in its legal environment. While verifying the hypothesis, the analysis of the physical parameters of real estate was abandoned due to the reason described above. However, an analysis of the market in relation to changes to provisions requires that the market dynamics be investigated. The research applied the method of literature analysis – a monographic method for the legal regulations concerning farming land management and statistical methods – including an analysis of the changes in the numerical data describing the real estate market. The research hypothesis was verified through: 1 developing and calculating the price change dynamics indicator and its graphic visualisation, 2 preparing a summary diagram for the indicator describing the rate of changes in the real estate market parameters, 3 preparing a detailed analysis of the legal situation existing at the time when the total indicator of price dynamics demonstrated observable irregularities in the change trend. Indicators for monitoring price dynamics were used to evaluate the rate of changes in dependent variables over time. In statistics, an indicator is a metric or a measure which characterizes a dependent variable in time or space, where an independent variable represents time. Indices are characteristic metrics of urban dynamics and they are popularly used in surveys of social and economic well-being (Timofiejuk, 2006). Indices are relative measures which can be applied in analyses of irregular changes. The discussed metrics are intuitive and comparable regardless of the type of the evaluated process and its magnitude (Okólski and Timofiejuk, 1983). Indicators of price dynamics in a given year (IDn) were calculated using the general formula: IDn = Xn/X1

(1)

where Xn - observed value of the variable in a given year, X1 - observed value of the variable in a year when the examination of changes in dynamics starts, in this study it is 2000. The dynamics indicator was calculated for observed variables (assumed measures), which included average prices for agricultural land (in selected EU countries), the number of transactions, the value of the sold area and the volume of transaction (only with regard to the market in Poland). Assuming 2000 as the initial year for examining the dynamics, the value assumed for this year on the chart was 1. Generally, it should be stated that the dynamics indicator reflects the current value (Xn) with regard to the initial period of the analysis (X1) assuming ID1 = 1. Additionally, the rate of changes was analysed, which made it possible to observe the change in dynamics in the period between subsequent years of observation (Xn-1) and (Xn), and not only with reference to the initial year (X1). The rate of changes in a given year (ITn) was calculated from the following formula: ITn = (Xn- Xn-1)/Xn-1

(2)

where denotations are used as above (formula (1)) To explain the method of performing a series of calculations for the assumed indicators, Table 1 presents an algorithm of the procedure.

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Table 1 Algorithms for calculating the dynamics and rate indicator in the series of observed values. Source: own elaboration

Observed value Rate indicator IT Change dynamics from the value of 1 ID

Year 2000

Year 2001

Year 2002

…….

Year 2016

X1 0 1

X2 (X2-X1)/X1 X2/X1

X3 (X3-X2)/X2 X3/X1

……. ……

X17 (X17-X16)/X16 X17/X1

3. Agricultural real estate market in Poland against the European markets The agricultural land market in Poland in 2000–2016 was shaped by various factors resulting from its political, social and legal conditions. National historical conditions should also be considered, perceiving the land in categories of cultural and symbolic values. Another factor affecting the shape of the real estate market in the examined period was the heritage of the socialist system – large-area, economically unprofitable agricultural enterprises (Ciaian et al., 2012; Foryś and PutekSzeląg, 2008). Together with the transition from a socialist economy to a market economy, subsequent factors gained in importance, i.e. an increase in human awareness concerning land as a multi-functional good (production, natural and public good). Even before joining the EU, the process of system transformation started in Poland and countries of former socialist block, which included ownership transformations in agriculture for more effective land management. As a result of the enlargement of the European Union in the first years of the 21 st century, legal conditions of real estate management in newly-accepted states were subject to successive changes (Foryś and Putek-Szeląg, 2014). The reform of agriculture in accordance with the Common Agricultural Policy (CAP) of 2003 granted the priority to subsidies related mainly to agricultural lands (one-time payment for the farm). Carrying out an analysis of the agricultural property market functioning in European countries required the use of many data sources, including e.g. statistical offices, agricultural ministry offices, institutions and agencies dealing in real estate trading. If EU countries used a national currency other than Euro, the average prices of land provided in local currency were converted into Euro by assuming the average exchange rate of foreign currencies published by the National Bank of Poland. Fig. 1 presents the chart for prices per 1 ha of real estate. Particularly large rises in prices were recorded in the Netherlands, the United Kingdom and Denmark.

Fig. 2. An analysis of real estate market agglomerations conducted based on the dynamics of changes in agricultural real estate prices. Source: own elaboration based on EUROSTAT (2018).

Fig. 2 presents a chart illustrating agricultural land prices recorded in five countries which joined the EU in 2004. Two countries were excluded from the analysis – Estonia and Hungary, due to the discontinuity of data concerning prices of 2000 - 2005. As has been already mentioned, the EU required the inclusion of policy concerning the agriculture of countries joining the EU into the mechanism of the Common Agricultural Policy (CAP). In consequence, the possibilities of obtaining direct payments emerged. The changes occurring in rural areas and in the agricultural real estate market were mostly the result of the successive introduction of new regulations concerning trade in real estate and changes in the cost-effectiveness of agricultural management (Latruffe et al., 2008). A preliminary analysis of the similarity of the dynamics of changes in agricultural real estate markets of the countries for which data on prices during the analysed period were collected was used to select the markets for further analysis. The agglomeration method that is used when forming clusters based on the distances between objects was applied. Clusters of objects (markets in the analysed countries) were determined based on the Euclidean distances i.e. the geometric distance within a multi-dimensional space. The analysis of agglomerations allowed a group of countries in which price volatility is most similar to be distinguished (Poland, Lithuania, Slovakia, Czech Republic, and Latvia). These five countries have a common geographical denominator (location in Central Europe) and the period of European Union membership. Further research focused on countries with a similar period of membership in the European Union since legal conditions in these countries evolved with similar dynamics. The research showed that in 2000–2004, prices of agricultural real estates in Poland and countries of the former socialist block, which before 2004 were not members of EU, remained relatively stable. After joining the EU, the prices for agricultural land in all countries clearly started to change. At this point, it should be emphasized that, as a rule, EU regulations are oriented towards the creation of conditions

Fig. 1. Prices of agricultural land in selected European countries that joined the EU before 2004. Source: own elaboration based on EUROSTAT (2018). 231

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Fig. 4. The area of farmland in Poland in 2000–2016 (according to the Main Office of Geodesy and Cartography). Source: own elaboration based on STAT.

Fig. 3. Prices of agricultural land in Poland against selected Central European states that joined the EU in 2004. Source: own elaboration based on EUROSTAT (2018)

2002, consisting mostly in including developed agricultural land, land under ponds and trenches to arable lands (Statistical Yearbook, 2009, p. 455). On the other hand, the area of arable land shrinking every year is mainly related to spatial development of residential estates, particularly around large urban agglomerations, which most often occurs at the cost of farming areas, and less frequently – forests (Źróbek-Różańska et al., 2014). Additionally, the construction of industrial and commercial centres contributes to this situation. The development of existing roads and the construction of new networks of roads and motorways, after a period of under-investing this branch, is the reason why a significant amount of farming area was purchased or expropriated for such purposes. At the same time, during the last few dozen years in Poland, significant transformations occurred in the structure of agriculture, which resulted in a 30% decrease in the number of farms, with a simultaneous increase in their average area from 8.4 ha in 2002 to 10.3 ha in 2015 (GUS, 2018). The EU accession by Poland and the beginning of the support under CAP resulted in a significant revival of the agricultural real estate market. The purchasers were mainly farmers who wanted to increase the area of their own farms and therefore their production scale (Czubak et al., 2014). The CAP influence on the growth of land prices in Poland was four times higher as a result of direct payments (under the first pillar) than of RDP payments (Rural Development Programme - the second pillar). This resulted, on one hand, from the nature of direct payments (paid directly with reference to farmland ha) and, on the other, from the fact that relatively less funds were allocated for the first pillar of RDP than for the second pillar (Milczarek-Andrzejewska and Zawalińska, 2014). Due to a dynamic increase, it became one of the most attractive forms of capital investments and apart from agricultural producers, owners of spare funds also decided to purchase land, which further increased land prices. In 2015, the agricultural land market revival was also affected by the approaching date of the end of the period of grace in Poland for land purchase by citizens of other EU states (Act, 2004). In 2015, legislation was initiated in Poland, aiming at introducing changes in the Act on the Agricultural System. The controlling the authority of the Agricultural Property Agency (ANR) over all agricultural land trade was to be extended and strict requirements on purchasers of such land were to be introduced (Sikorska, 2017). Since September 2017, the role of ANR was assumed by the National Support Centre for Agriculture (KOWR).

stabilizing economies (including the real estate markets) of their member countries and, therefore, the question emerges of why significant changes in prices occurred in countries that joined the EU. The course of the lines presented in Fig. 3 indicates that after 2004 a noticeable increase in prices took place in the analysed countries (particularly in Poland and Lithuania). At the same time, it is clear that this dynamic growth was also accompanied by slowdowns and periodical decreases in agricultural land prices (2008–2009). It can be assumed that one of the factors contributing to the changes in prices could also be the change in demand as a consequence of introduced changes in legal regulations concerning land purchases by foreigners. According to the Association Agreement, starting from the date of joining the EU in 2004, the Czech Republic, Estonia, Hungary, Lithuania, Latvia and Slovakia could maintain a transition period for 7 years, and Poland for 12 years, during which citizens and legal persons from other EU member states and the European Economic Area states had to apply for permission to purchase arable land in these countries (Ciaian et al., 2012). In Slovakia, for example, pursuant to the Act on purchasing arable land, the possibility of purchasing such land was subject to satisfying several conditions, e.g. running an agricultural activity for at least three years or working in agriculture or running a business activity in agriculture for at least three years (Stankiewicz, 2015). As a result of joining the EU by those countries, a factor emerged in the agriculture real estate market which undermined the perception of agricultural land as a good used mainly for food production (Ciaian et al., 2012). One of the most significant legal and financial EU regulations is to favour Less-Favored Areas (LFA). These are areas where agricultural activity is more difficult due to several factors, e.g. worse climatic conditions, steep slopes in mountain areas or low production usefulness. Since 1975, this has been the measure of the effectiveness of the Common Agricultural Policy (Polimenia et al., 2018), but in Poland this name appeared only along with EU accession. In consequence, a new, previously non-existent category of agricultural land, for which there was no demand, emerged in the agricultural real estate market. A response to increased demand was the supply of agricultural land in those places which featured agriculturally unattractive land before the EU accession. Another reason for a large growth dynamics in prices after joining the EU could be the noticeable shrinkage of the supply of agricultural land. Fig. 4 presents changes in the surface area of arable land in Poland over the 16 years under analysis. It can be clearly seen that since 2002 the area of arable land has been successively reduced. What may be surprising is the sharp increase in the arable land area in 2002 in relation to 2000. The reason was the fact that the areas recorded by surveying services in Poland include the land classified according to the forms of possession in conformity with the real estate cadastre (Regulation, 2001). This register introduced changes starting from

4. Analysis of indicators for dynamics and rate of price change for agricultural real estates Following the research hypothesis that regulations applicable in a given country and at a given time have an effect on the condition of the 232

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Fig. 6. Agricultural real estate price changes rate in selected countries. Source: own elaboration based on EUROSTAT (2018).

Fig. 5. Price change dynamics in selected states that joined EU in 2004. Source: own elaboration based on EUROSTAT (2018).

Table 2 Basic statistical parameters of the price change rate indicators. Source: own elaboration based on EUROSTAT (2018).

real estate market, the authors decided to describe the situation in the examined agricultural real estate markets by calculating the price change dynamic indicator and presenting it in a graphic form (Fig. 5). The curves in Fig. 5 demonstrate that out of five countries subjected to a detailed analysis, only the Czech Republic and Slovakia maintained relative price stability, in the first year after joining the EU. It can be assumed that such a situation was a consequence of Czech legal regulations that were similar to those applicable in the European Union, or the Czech agricultural real estate market was not an emerging market (still poorly developed). The analysis of the literature describing the situation in the examined countries shows that, in those countries, as well as in Estonia and Bulgaria, separation of private farms from large state-owned and cooperative farms became an unfeasible task for social reasons (not all beneficiaries of the restitution expressed a willingness to run farms on their own) and the huge costs of such transformation. In effect, the restitution of the land ownership did not significantly change the production structures of farms operating in those countries. Former state-owned farms and some production cooperatives were transformed into companies or market-oriented cooperatives and previous owners leased to them the land they took possession of. Therefore, because of a low number of private farms in those countries, this did not lead to the emergence of a land market, due to a low number of land purchase-sale transactions. In the Czech Republic and Slovakia, such a situation contributed to the establishment, through administrative action, of prices of land sold from the resources of the State Treasury. In consequence, two land price systems operated in those countries: the officially decreed system, covering state land market, and the free-market price system, concerning relatively low, private trade in land (Zadura, 2012; Swinnen and Vranken, 2009). Due to the fact that the dynamics chart illustrates the change in prices with reference to the initial period and does not reflect a change in prices in relation to the previous period, a chart presenting change rate indicators was prepared for selected countries (Fig. 6). The course and the shape of the line in the Fig. 6 indicate that the highest price fluctuations (the highest amplitude) could be observed in the Latvian agricultural real estate market. Just after Latvia joined the EU in 2005–2007, the average price of 1 ha of Latvian agricultural land doubled. The varying prices in particular countries that can be seen in Fig. 6 may indicate the existence of local (national) factors affecting the market behaviour, and not only global factors. If only global factors affected all countries at the same time, there would be an identical direction of rate changes. The analysis of the basic statistics for the rate of change in prices, shown in Table 2, indicates that there is no similar level of changes in the rate, despite a similar geographical location and a similar date of accession to the European Union. This analysis confirms once again that in these countries, changes in the legal environment must have taken place at various times.

Country

Mean

Median

Standard deviation

Czech Republic Latvia Lithuania Slovakia Poland

0.13 0.24 0.19 0.16 0.16

0.10 0.09 0.14 0.04 0.17

0.17 0.51 0.20 0.46 0.19

The economic crisis that started in this country in 2008 resulted in a stagnation in agricultural real estate selling transactions and in 2009 agricultural land prices returned to the 2005 level. Since 2010, a gradual increase in land prices occurred and in 2013, the average price of agricultural land amounted to 1200 euro/ha (i.e. 12% more than in 2012). The increase in prices was also affected by a decrease in agricultural land supply. In 2011, a total of 57.000 ha of arable land was sold in Latvia, in 2012 it was 52.000 ha, and in 2013 only 46.000 ha. Despite the return of the price growth trend, Latvia is still one of the EU states with the lowest market value of agricultural land (Sikorska, 2017). Carrying out the assumed task of a detailed examination of the real estate market in Poland, the rate of assumed parameters describing the agricultural real estate market was analysed. Fig. 6 presents the ratio indicator with regard to the following parameters: number of transactions, size of sold agricultural land area in ha, trade volume and average price of 1 ha of agricultural land. Analysing the course of the line in the chart, it should be remembered that a drop in the rate indicator below 0 (crossing the vertical axis) means the reversal of the trend in relation to the preceding year. If the chart does not cross the vertical axis, and only an individual value is below that previously observed, it means preservation of the previous trend at its lower dynamics. Therefore, in observing the course of the rate line in Fig. 7, a typical relation can be seen for the coexistence of changes in the analysed values, i.e. an increase in average prices for 1 ha of agricultural land is accompanied by a decrease in the total sold area. Another trend is observed for the years of 2007–2009, when the reduction in the price change rate was accompanied by a decrease in the rate of the sold area size and the number of transactions. The observed phenomena can be related to the global banking crisis taking place at this time all over the world. Likewise, recurring conformity of directions in individual years occurs between such examined parameters as the number of transactions and the total area of sold agricultural real estates. In 2014–2016, the rate of the parameters under examination was consistent, while in 2006–2008, it is in the counter-phase. Based on a detailed graphical analysis of the rate of the examined parameters, the conclusion can be drawn that the emergence of the change in their co-occurrence was caused by factors that are significant for the market and have a strong impact in a short 233

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purchased a property other than agricultural or forest property (Act, 2004). For agricultural and forest real estate, the appropriate permit was still required. This regulation was in force with a 12-year transition period, i.e. by the end of April 2016. The permit was not required if the foreigner wanted to purchase agricultural real estate that he or she previously leased for 3 or 7 years, depending on the location of the real estate (province), as long as for the lease period he or she personally ran the agricultural activity and resided in Poland. It was observed that the total area of agricultural land in Poland in 2005 was 19,148,000 ha, in 2010 18,931,000 ha, and in 2013 – 18,770,000 ha. As results from the above-mentioned statistical data, the area of farming land systematically decreased. Fragmentation of farms resulting from irrational divisions of those farms was the factor stimulating this phenomenon. It was perceived as a threat to the food safety of the country, as well as to the economic interests of the entire Polish economy, in which agricultural production plays a significant role (Hejbudzki, 2015). In 2015, legislation was initiated on introducing changes to the Act on the Agricultural System of 2010. The controlling authority of the Agricultural Property Agency (ANR) over the entire agricultural land trade was to be extended and requirements posed to purchasers of such land were to be strictly specified, e.g. the need to reside in the commune where the purchased real estate is located, the obligation to personally run the farm, as well as the requirement to hold agricultural qualifications or be in a course for their acquisition. The act entered into force on 30 April 2016 (Act, 2016). The need to provide farmers with better access to land purchase was another argument justifying the necessity of increasing the supervision of trade in agricultural land. The dynamic growth in its prices observed after 2004 eliminated many potential purchasers from the market who wanted to increase their farms for production purposes, while it contributed to increasing the number of purchases aimed at an attractive investment of money (Sikorska, 2017). Additionally, the above-mentioned act introduced a ban on trading in land purchased from the state property stock for the period of 10 years. The possibility of selling, exchanging or donating agricultural real estate is limited due to the need to obtain consent from the field branch of the Agricultural Property Agency (since September 2017 – the National Centre for Agricultural Support. Pursuant to regulations published on 30 April 2016, it is possible to purchase an agricultural plot up to 0.3 ha without any additional requirements. On 1 May 2016, the transition period related to purchase of agricultural land by foreigners ended. Currently, they can purchase agricultural land in Poland without the permission of the Minister of the Interior and Administration. Apart from Polish regulations concerning transition periods for purchasing agricultural land, such regulations were introduced in accession treaties by the other eight states joining the EU in May 2004 – Bulgaria, the Czech Republic, Estonia, Lithuania, Latvia, Romania, Slovakia and Hungary (Marks-Bielska and Lizińska, 2015). Currently, transition periods have ended in the above-mentioned countries. In most of those countries, as in Poland, regulations were introduced to protect the agricultural property stock against uncontrolled buying. Those solutions seek to prevent, e.g. the activities of persons without agricultural qualifications seeking to purchase land for speculative purposes (Stankiewicz, 2015). However, Polish legal regulations with regard to real estate management were among the strictest regulations in the world, particularly regarding land purchase by foreigners (Karaszewski et al., 2017). The overlapping of various changes in the legal environment inspired the authors of the article to calculate the total indicator showing the rate of four observable variables (number of transactions, size of sold area, trade volume and average price for 1 ha of arable land). Thus, the research hypothesis formulated in the beginning could be verified. The analysis of the determination of the global rate indicator was

Fig. 7. The rate of changes in the assumed parameters of the agricultural real estate market in Poland. Source: own elaboration

period of time. Due to the fact that parameters observed in Fig. 6 occur together with a dependency changing in time, for the purpose of research, the authors decided to analyse in more detail how the legal environment of the Polish real estate market changed at that time. The results of the analysis will confirm or disprove the assumed research hypothesis. 5. Global rate indicator against the legal environment of Polish agriculture As it clearly follows from the conducted analysis of the agricultural real estate market behaviour, in the examined period of 2000–2016, this market demonstrated noticeable changes with regard to its selected elements. Following the research hypothesis formulated, the authors decided to search for the causes of those changes in the legal environment of agricultural activity in Poland. With this aim in view, an analysis was carried out with regard to the Polish legal provisions referring directly to the freedom in trading in agricultural real estate, and indirectly to the profitability factors of agricultural activity. An attempt was made to refer to those regulations in a chronological perspective for the time period under analysis. However, in some cases, amendments to legal acts and the establishment of new regulations overlap. In the first years of the examined period, the Act on Managing Agricultural Property of the State Treasury (Act, 1991) and the Act on Property Acquisition by Foreigners of 1920 (Act, 1920) were applied. According to the regulations set forth in the Act of 1920, a foreigner seeking to purchase real estate required a permit, which was issued, through an administrative decision, by the Ministry for Internal Affairs, after obtaining the consent of the Ministry for Rural Development. Soon afterward, the Act on the Agricultural System of 11 April 2003 (Act, 2003), entered into force, replacing the act of 1991. Its aim was to accelerate agrarian transformations and the limit purchase of agricultural real estate by unauthorized persons, purchasing it for other purposes than for running agricultural production. However, it was perceived that the instruments it provided, in the form of the preemption right and the right to purchase by the appointed state Agricultural Property Agency, were not able to fully implement the objectives related to shaping the agricultural system of the state. This state of affairs brought about negative economic results, expressed in unsatisfactory improvement of the area structure of farms and related failure to use agricultural land in an optimum manner (Hejbudzki, 2015). Since 2004, i.e. the moment when Poland joined the European Union, foreigners who were citizens of the EEA member states were not required to obtain a permit for land purchase, but only when they 234

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of the year they refer to, and the value marked in a point corresponding to a given year was determined based on the baseline data from January to December. Additionally, dates are marked with legal regulations related indirectly (Regulation, 2001, 2013) and directly to the real estate market (Act, 2010, 2016). To supplement the content of Fig. 9, a proposed course of the general/global rate (established on the basis of Formula 3a values describing the real estate market: transaction number, size of sold area, trade volume (value), average price per 1 ha of farming land) is added. The analysis of Fig. 9 indicates that the proposed and calculated global rate indicator for introducing any legal regulations responded to the changes in the legal situation and decreased in the year when a new regulation came into force. The introduction of new regulations after Poland joined the EU was accompanied by a decrease in the global rate below the 0 level, which is tantamount to a decrease in the value of the observed parameters. When introducing new regulations before the EU accession, a slight decrease in the rate without exceeding the 0 level is observed (a positive trend still occurs for most parameters). In the study, negative global rate indicators were observed in 2009 (-0.72), 2013 (-0.07) and 2016 (-1.20). The change in the indicator value can be explained by the range of limitations introduced with the new legal regulations.

Fig. 8. Global rate indicators determined based on algorithms 3a – 3e. Source: own elaboration.

conducted based on five proposed different mathematical models: XTn_1 = XTn_

number of transactions +

XTn_area + XTn_

XTn_2 = log

(XTn_ number of transactions + XTn_area + XTn_ trade volume + XTn_ price 1 ha)

trade volume

+ XTn_

price 1 ha

(3a) (3b)

XTn_3 = tanh (XTn_ number of transactions + XTn_area + XTn_ trade volume + XTn_ price 1 ha) (3c)

6. Conclusions and recommendations

XTn_4 = cos (XTn_ number of transactions + XTn_area + XTn_ trade volume + XTn_ price 1 ha) (3d)

This study analysed the dynamics of selected parameters identifying the agricultural real estate market in Poland (number of transactions, size of the area sold, sale volume and average price for 1 ha of arable land) in 2000–2016. The analysis of Figures dynamics prepared separately for individual parameters did not clearly reflect the enactment of new legal regulations concerning the agricultural real estate market. Therefore, the authors proposed a new indicator, referred to as the total indicator for the market parameters rate, XTn_global. The proposed indicator is an algebraic sum of rate indicators calculated within the assumed parameters describing the real estate market. The adoption of the global indicator calculated based on the logarithm function, hyperbolic tangent, cosine of the sum of rate indicators, or the sum of rate indicator squares, prevented the determination of a constant correlation between the changes in legal environment and the agricultural real estate market parameters. The analysis of the Figure for this indicator demonstrated that the introduction of legal regulation unfavourable for the agricultural real estate market was reflected in a decrease in the total rate indicator below 0. In this way, the research hypothesis was positively verified. Therefore, it can be anticipated with high probability that when new legal regulations introduce limitations in the agricultural real estate market, the global rate indicator calculated for the year when the regulation is introduced will show negative values. This indicator can also be used as a guideline for the validity to undertake research concerning changes in the legal environment concerning management conditions in rural areas. However, it should be emphasized that these

XTn_5 = (XTn_ number of transactions2 + XTn_area 2 + XTn_ trade volume2 + XTn_ price 1 ha2) (3e) where: XTn_number of transactions – rate indicator of the number of transaction in year n, XTn_area – rate indicator of the area sold in year n, XTn_trade volume – rate indicator of the trade volume in year n, XTn_price 1 ha – rate indicator of price per 1 ha in year n. The above analysis used five mathematical models and yielded five different results. Each model used a different function, and the condition for the selection of a single model was the reflection of changes in the legal environment. The selected model of calculating the global rate XTn_1 is presented in Fig. 8, where the changes introduced into legislation are indicated against the Figure background. The calculated global rate indicators are listed in Table 3 and Fig. 8 shows global indicators. The course of the global rate indicator and rate indicators determined for particular parameters is shown in Fig. 8. The dates of changes in the legal environment of the agricultural real estate market are indicated as well. The quoted legislative acts referring to agricultural policy and agricultural real estate management are also placed on the timeline (Fig. 9). The data specified in subsequent years were determined at the end Table 3 Global rate indicators for the agricultural real estate market in Poland. Source: own elaboration Year

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Transaction number rate Sold area rate Volume rate 1 ha price rate XTn_1 XTn_2 XTn_3 XTn_4 XTn_5

0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00

0.00 0.00 0.00 0.05 0.05 −1.34 0.05 1.00 .

0.00 0.00 0.00 0.23 0.23 −0.64 0.22 0.97 0.00

0.00 0.00 0.00 0.02 0.02 −1.71 0.02 1.00 0.00

0.04 −0.13 0.07 0.07 0.06 −125 0.06 1.00 0.02

−0.08 −0.13 0.15 0.72 0.67 −0.18 0.58 0.79 0.04

0.05 0.18 0.33 0.05 0.61 −0.21 0.54 0.82 0.14

0.23 −0.49 0.86 0.25 0.84 −0.07 0.69 0.67 1.03

−0.19 0.35 −0.05 0.19 0.30 −0.53 0.29 0.96 0.16

−0.11 −0.13 −0.30 −0.17 −0.72 −0.14 −0.62 0.75 0.12

0.29 0.24 0.29 0.00 0.82 −0.09 0.67 0.69 0.22

0.07 0.23 0.46 0.25 1.01 0.00 0.76 0.54 0.27

0.05 0.50 0.38 0.25 1.18 0.07 0.83 0.38 0.40

0.42 −0.28 −0.24 0.03 −0.07 −1.16 −0.07 1.00 0.31

0.04 −0.06 0.09 0.23 0.30 −0.52 0.29 0.96 0.01

0.23 0.23 0.42 0.19 1.07 0.03 0.79 0.48 0.28

−0.50 −0.44 −0.25 −0.01 −1.20 0.08 −0.83 0.36 0.50

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Fig. 9. The global rate indicator and dynamic indicators for particular parameters of the agricultural real estate market in the context of changes in the legal environment. Source: own elaboration

are the results of the research carried out in a specific real estate market for a specific time period. It seems justified to conduct further studies to confirm the possibility of expressing the degree to which the freedom for real estate market operation is limited with a negative value of the total rate indicator, or in the case of market stimulation, with a positive value of the total rate indicator (Le Billon and Sommerville, 2017). An additional area requiring extended research is related to selecting the proper set of agricultural real estate market parameters assumed to determine this indicator. The data gathered for this study, obtained from various sources, did not allow us to obtain a clear answer to the question on the advance time period with which the agricultural real estate market responded to changes in legal regulations. It seems that the application of numerical values of the examined parameters for a shorter period of time, e.g. a quarter or six months for calculation purposes, could help provide such an answer (Rui-Lin et al., 2016). However, this would require access to relevant data or involve the need to monitor the market on one’s own. The proposed method of researching the agricultural real estate market and the obtained results may also be a source of inspiration for further research into the consequences of adopting new legal regulations for the participants in this market.

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