The promised land
The Agricultural Property Agency (ANR), which deals with agricultural land and real estate belonging to the State Treasury, is currently selling agricultural land for zł.6,500 per hectare. This compares to zł.5,105 in Q1 2005, and zł.1,100 a hectare in 1995. A similar price growth can also be seen on the private land market.
According to the National Research Institute of Agricultural and Food Economics (IERiGŻ), the price increase so far has been connected with Poland's accession to the EU and EU direct subsidies for Polish farmers. These subsidies are calculated according to each hectare of a farm, so the larger the farm, the greater the subsidy. As a result there is a trend among farmers to increase the size of their farms, which has the additional bonus of making them more competitive. "Commercial farms, in order to exist and be competitive, must have large-scale production - they have to work according to economies of scale," says the IERiGŻ.
The president of ANR, Stanisław Kowalczyk, also points to the growing demand for agricultural land among city dwellers and representatives of non-agricultural sectors, such as industry, trade and infrastructure. However, "they constitute a significant minority among the land buyers. Eighty to 90 percent of the buyers of our land are farmers," says Kowalczyk.
Not much left
ANR currently owns about 2.7 million hectares of agricultural land, two million of which is being leased (170,000 hectares by foreigners). After the forest, lake and waste areas are subtracted, not much remains.
"We currently do not have much land for sale. For example we already can't offer anything in the Opolskie, Małopolskie, Świętokrzyskie, and Łódzkie regions," says Kowalczyk. "We have less than 150,000 hectares to distribute, but it has to be stressed that this is poor quality land." A part of ANR's two-million hectares in lease rotates and is also on offer. Much of the agricultural land in Poland is low quality. "The best land, i.e. that of the first, second and third class, constitutes only 25 percent of Poland's agricultural land," says the head of the land management department in the Ministry of Agriculture, Jan Bielański.
The price of ANR's land depends on the region. "The most expensive land is found where the demand is highest, such as the Wielkopolski region. Since the middle of last year the Poznań branch of ANR has not been selling land for less than zł.10,000," said Kowalczyk. The lowest prices are in the east of Poland, in the Świętokrzyskie and Podlaskie regions. "This is connected to the fact that in the east we have land that originates from the State Land Fund, which was created in the 1950s. These are small, widely spread plots. In the Lubelskie voivodship we have 23,000 hectares of land in more than 50,000 plots - an average plot is about 40 acres," Kowalczyk explains.
Attractive property
Apart from typical agricultural land, ANR sells land classed as 'attractive property'. "Attractive property is property designated for non-agricultural use in the local spatial development plan," explains Kowalczyk. "So even if today wheat is growing on the land but the plan says the land is an area for economic activity (residential, warehouse, roads), we can sell it as attractive property, which is valued in a completely different way." The price is then about 10 times that of land classed as agricultural.
This year the agency plans to sell about 1,700 hectares of such land in plots up to one hectare in area.
"On average this will be zł.70,000 per hectare," Kowalczyk says. While agricultural land is sold via limited tenders directed at Polish farmers, attractive property is on sale in unlimited tenders.
Attractive property can be found in every voivodship. "Very much depends on the investments planned in Poland. Sometimes some regions see investments in unexpected places, such as in Łysomice near Toruń, where Sharp will invest in our plot, which we sold to the local Special Economic Zone," says Kowalczyk. This results in the growth of prices of neighboring plots and the increase in the value of the adjacent land.
Change of plan
"This is the biggest problem for our leasees. After leasing the land for a few years, farmers are often interested in buying the land, but when it changes its designation they can no longer afford it," Kowalczyk says. He admits that gminas are increasingly changing their plans. "Local governments realise that only if they change their plans can they activate entrepreneurship in the area."
There is a huge difference between the price of agricultural land in Poland and in the western EU. Despite the significant growth in prices in Poland, land here is still relatively cheap. While one hectare of land costs about EUR 1,700 (zł.6,662) in Poland, it reaches EUR 2,500-3,000 (zł.9,798-11,757) in eastern Germany, and in countries such as the Netherlands, which has a small amount of land per citizen, it is 25 times more expensive.
"Prices in Poland will not reach the [western] European level very quickly," claims Kowalczyk, saying that this is largely due to restrictions for foreigners, who actually have a small impact on demand. "Foreigners buy very little land. So far they have purchased about 1,100 hectares from the agency," Kowalczyk says.
Learn the lingo
In May 2004 a 12-year transitional period was introduced, during which foreigners have to apply to the Ministry of Internal Affairs and Administration for a permit to purchase land. Applications are then subject to analyses by the Ministry of Agriculture and the Ministry of Defense.
According to Jan Bielański, a positive response from the Ministries depends on criteria such as a foreigner's Polish origins and the closeness of his relations with Poland (e.g. knowledge of Polish, time spent in Poland).
"We also check whether the foreigner will not upset the neighborhood by, say, buying up the majority of local land. We conduct an environmental inquiry and ask how the investor will be perceived," says Bielański. The foreigner also has to agree to the land's designation. "The foreigner cannot develop land with a residential project if the local master plan designates the land as agricultural."
The Accession Treaty also says that the 12-year transition period does not apply to foreigners who have been leasing and using agricultural land in Poland for seven years in the northwestern voivodships (Dolnośląskie, Kujawsko-Pomorskie, Lubuskie, Opolskie, Pomorskie, Warmińsko-Mazurskie, Wielkopolskie, and Zachodniopomorskie) and for three years in the central voivodships (Lubelskie, Łódzkie, Małopolskie, Mazowieckie, Podkarpackie, Podlaskie, Śląskie and Świętokrzyskie). "We are not against foreigners buying land in Poland, but we look into each case carefully. We do not agree to the sale of huge areas," says Bielański.
Small is beautiful
According to Bielański, last year 420 applications for the acquisition of 3,800 hectares of agricultural land were submitted, of which 377 applications for 978 hectares were accepted. "So most applications were accepted but for smaller areas," Bielański says. Since the 1990s, about 4,800 hectares have been sold to individuals and 6,300 hectares to companies.
According to analysts, once the transition period is over, one should not expect massive speculative transactions of agricultural land, even if land prices in Poland do not catch up with western EU levels. "Speculative land purchases took place before Poland's accession to the EU. Now, in those regions where agricultural production is well developed, speculative transactions will be incidental," says IERiGŻ. "I would not expect a massive acquisition of agricultural land by foreigners after the transition period. It has never happened in any of the newcomers to the EU. Agricultural land is not subject to massive acquisition by foreigners," says Kowalczyk.
There is 18.3 million hectares of agricultural land in Poland and it constitutes 60 percent of the country's total area. Almost 80 percent is owned by the farmers who use it, unlike most EU countries, where land prices are such that farmers can't afford to buy it and leasing is more common. However, this trend can also be seen in Poland. "Leasing agricultural land used to be unpopular a few years ago. Now this is changing and also lease rents are increasing," say analysts from IERiGŻ.
