7 June 2002

Purchase prospects as new states near entry

As EUenlargement

gathers pace, more

western farmers are

thinking of investing in

the candidate countries.

Europe editor Philip Clarke

looks at the conditions for

buying land and the

prospects for prices

EU enlargement is forging ahead, with up to 10 new member states on track to join in the next few years.

Each candidate will be judged on merit. But the intended "roadmap" anticipates the completion of negotiations with the best-prepared countries by the end of this year.

Progress so far has been surprisingly good. According to the heads of state summit at Laeken last December, all 10 candidates could be ready for full accession in the first half of 2004.

An agreement on agriculture and finance is still outstanding. The commission issued proposals in January and farm ministers are expected to agree them with the candidate countries by the end of the year.

As for land ownership – one of the thorniest subjects in countries that have a history of invasion – the terms of EU accession have already been agreed.

In some countries – Cyprus, Estonia, Latvia, Lithuania, Malta and Slovenia – there are no transitional arrangements. EU citizens will be free to acquire farmland and forestry from the moment of accession.

Agreed transition

Others, such as Czech Republic, Hungary and Slovakia, have agreed a seven-year transition before allowing foreigners to invest in agricultural real estate. But in the Czech Republic, self- employed farmers who are already residing in the country may buy land straight away, while in Hungary and Slovakia, they may do so after three years of active farming.

The one country to have held out for more restrictive terms is Poland. Mindful of its history of repeated occupation from the east and from the west, agreement with Brussels was only achieved in April.

Under this deal, Poland will be able to restrict sales of land to foreigners for the first 12 years after accession. But farmers from other EU countries currently leasing Polish farms will be able to buy their property seven years from the date of signing the lease in the west of the country and three years in other regions.

Despite the completion of the terms of land ownership, the subject remains a prickly one. Some candidate countries may seek to re-open negotiations now Poland has got a better deal.

But British companies already operating in central and eastern Europe are generally pleased at the way the land ownership question has been settled.

Shorter periods

Chris Graf Grote, of Norfolk-based Farmwealth, which runs 7000ha (17,300 acres) in the Czech Republic and 25,000ha (61,775 acres) in Poland, agrees that the shorter transition periods are better than expected.

While most of the land his company farms is done so on short to medium-term leases, (5-15 years in Czech and 15-25 years in Poland), it all comes with purchase options. Mr Graf Grote anticipates taking ownership when the opportunities arise.

Land prices in the Czech Republic range from k800/ha (£200/acre) to k2000/ha (£500/acre), with the top values paid for arable land close to the capital city, Prague. Official prices in Poland are very similar, with arable land ranging from k1000/ha (£250/acre) to k2000/ha (£500/acre). Top prices are paid in the west of the country, which is closer to the main EU markets.

Mr Graf Grote believes these prices will accelerate upwards soon after accession. "If we take a value of around k1500/ha (£375/acre) for a typical Polish arable farm, to buy something similar in the east German lander would cost k6500/ha (£1630/acre) or more.

"This money is being paid just 50km away and the Germans know that Poland will be a member of the EU in just two years time. You can be sure German values are not coming down, so its clear which way Polish prices are going to go during their transition."

He sees demand for land in the Czech Republic and Poland really taking off in the next few years as farmers in western Europe realise they need scale of production to make a decent living. "The desire to stay in farming is even stronger in continental Europe than in the UK and more farmers are willing to move to achieve that aim."

But Adam Oliver, who represents land agents Brown & Co in Poland, is more circumspect. While prices on the internal market have firmed a little in recent months, he believes values will climb more gradually in the first few years of EU accession.

"We see that expectations will rise, but this will outpace actual land market developments," he says. In particular, he believes domestic legislation will still stifle demand. For example, the PSL smallholders party, currently in opposition, is proposing a new land law to impose a maximum farm size of 350ha (865 acres).

More generally, Mr Oliver believes there isnt the money in west European agriculture at the moment to enable farmers to buy vast tracts of central and eastern Europe at inflated prices.

"To suggest land values will double following EU accession is entirely unrealistic," he says. "If there is to be equalisation of land values it is more likely to be in the 10 to 20-year time frame." &#42