Impact of parcel fragmentation on the calculation of the real estate value of land belonging to farms

Abstract

Agricultural parcels are often the subject of land valuation studies. This approach implicitly assumes that the real estate value of the land belonging to a farm is the sum of the values of the individual parcels that make up the farm. Nonetheless, the value of a whole can be very different from the sum of its parts. This study proposes a methodology for calculating the real estate value of the land belonging to a farm, the latter being understood as the set of the parcels, not only on the basis of production factors such as sur-face area, type of crop and intensity, but also by including parameters relating to the fragmentation of the land. Fragmentation increases production costs and reduces farmers’ incomes and by extension the real estate value of the farm. In our study area, the province of Jaen in Spain, figures for its most emblematic crop, the olive, show that fragmentation of the land reduces its value by between 51% for a 10 ha farm and 12% for a 30 ha farm as compared to the values set out in the bibliography. The reorganization of the ownership system or the promotion of systems for the common management of land could increase the profitability and therefore the value of land according to the ‘income capitalization’ approach.