Rental prices for Slovak arable lands catching up, but still among the lowest in the EU

Most farms in Slovakia own little own land. Around 90% of the lands are owned either by (many) small private people or the Slovak Land Fund (SPF) and the Catholic Church and rented out to farmers. This is the highest percentage in the EU.

Rental prices for arable lands in Slovakia strongly vary per region and are directly influenced by the landparcel’s location and accessibility, the quality of the land, the competition among farmers, its size (the larger the landparcel the higher the rent), the rental period and last but not least the underlying value of the land. Indirectly, rental prices are influenced by the subsidies, provided by the state to the users of the land. Especially to so called ‘single area payment’ per hectare (currently ca. €190/ha) has seen sharp increases in the last years, leading, with a time lag, to higher rental prices. Rental prices are not regulated by the Slovak state although specific laws apply on contract termination and the position of the farmer towards the crop on the lands.

Because of excellent infrastructure, high quality soils and high demand from farmers, the rents in the Southern and Western part of Slovakia are substantially higher than those in Middle- and East-Slovakia. Rental prices in West- and South-Slovakia for large parcels from private owners vary between €100/ha to €200/ha. Smaller parcels are mostly rented for around € 80/ha. Rent in other less fertile areas in Slovakia go as low as € 30/ha. Rents for land owned or managed by the SPF and the Catholic Church (which mostly follows the rental prices set by the SPF) are ca. 40% lower the market rents from private owners. In 2013 the SPF has announced that it will substantially increase rental prices for new contracts as of 2014, to be more in line with market prices.

development-rental-prices-land-parcels-slovakia

Payment of the rents are negotiated by landowner and tenant. However, most rents are paid after the season or split in parts (for example first 50% in March and the remaining 50% in November). The SPF mostly requests rental payments in September and December.

Although not yet common, in more long term contracts landowners of larger parcels ask for a yearly inflation correction on the rental prices. Most farmers accept this in exchange for longer rental periods.

Compared to other EU countries, rents for arable lands in Slovakia are among the lowest. Rents in the old EU member states are some 5 to 10 times higher, those in other new member states some 10% to 40% higher than in Slovakia. Although some catching up has taken place in the last years, we believe that rents in Slovakia will show further increases in the coming years. Together with rising landprices, we estimate that the average capitalisation factor (rental prices / land value) will stay around 2%.

capatalisation-factor-arable-lands-europe