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How much will we agree to compromise on real estate prices linked to agriculture? | angle

Living near agricultural land was previously considered an undesirable situation, but it seems that this assumption is no longer necessarily true. A new Israeli study shines a spotlight on the changing preferences of Israelis with the help of real estate market analysis

Live near open spaces. Illustration: depositphotos.com
Live near open spaces. Illustration: depositphotos.com

The following figure probably won't surprise you: Israel is one of the smallest countries in the world and yet it is the country that owns it The highest population growth rate among the developed countries of the western world. In fact, in 76 years, The population in Israel increased 12 times – more than any other western country. Among the many consequences of the increasing density is the somewhat alarming fact that Israel is expected to lose over a tenth of its open spaces by 2050, mainly due to the need to build residential buildings and transportation infrastructure. The conclusion is simple: less nature for all of us. When nature becomes a rare and expensive commodity, it is perhaps not surprising that many Israelis prefer to live close to open spaces, and that they are becoming less picky about the type of open spaces. 

According to State of Nature report of the Marg - the national program for assessing the state of nature, more than 10 percent of the country's total areas are built-up areas and about 85 percent are natural, forested or agricultural areas. One might think that this is an encouraging figure indicating that in Israel there are many open areas and a lot of nature - but in practice about 70 percent of those open areas are desert areas located south of Beer Sheva. On the other hand, in the center and north of the country, where the vast majority of the country's citizens live, there are very few open spaces left and they are diminishing year by year. New research, which will be presented this year In the 52th Annual Conference on Science and the Environment, which will be held on September 25-26 at Ben-Gurion University of the Negev, examined how the preferences of Israelis for living near open spaces are reflected in the real estate market from the late 90s to the beginning of 2023. Spoiler: it seems that the Israelis are ready to compromise. 

The move to the village

The research deals with a field of research called environmental economics, which is a subfield in economics that analyzes environmental quality issues using economic models. "During the Corona period, we saw people moving to rural areas outside the big cities, and I was interested in knowing how this trend is also reflected in economic data," says Dr. Yanai Farha, author of the study and head of the Department of Economics and Management at Tel Hai Academic College. "In my opinion, the real estate market is one of the best ways to test people's preferences - this is expressed in transactions and actual elections. Using the appropriate statistical methodology, it is possible to extract from these choices the value attributed to various characteristics, for example the distance from open areas," he explains. 

In the research, Farha used a method called the "Donian regression", by means of which the various factors that influence prices, for example real estate prices, are checked. He used the real estate transaction data in Israel from 1998 to the first quarter of 2023, and entered it into a geographic information system. To measure the proximity to open spaces, he used geographic information system layers of the Nature and Parks Authority and the Ministry of Agriculture, which show all protected open spaces and agricultural areas in Israel. The combination of these data made it possible to measure the effect of the distance from open areas and the size of the open areas on the real estate price each year.  

The study distinguishes between protected areas such as nature reserves and national parks and agricultural areas. "The two clear things that can be seen thanks to the data is that people are more willing to compromise on the distance from nature reserves, and that proximity to agricultural areas is much more acceptable than before," explains Farha. "The data shows that in the past living in a house located next to agricultural land was considered undesirable, perhaps due to various factors such as fear of spraying, bad smells or noise and even fear of future construction. The study shows that in recent years the consideration of living next to agricultural areas has less influence on the decision to purchase a new property. On top of that, in light of the fact that the open spaces are shrinking year by year, the buyers have become less selective in relation to the type of open space near which they wish to live." 

how expensive (or cheap) is it

So what is actually the difference in prices? According to the study, a property located one kilometer from a nature reserve is more expensive by about NIS 100 on average than a similar property located two kilometers away. On the other hand, a property located one kilometer from agricultural land is about NIS 60 cheaper on average than one located two kilometers away. The negative effect of agricultural land on house price disappears at a distance of two kilometers from the agricultural land, while the positive effect of nature reserves or national parks on the price persists for greater distances, even up to 13 kilometers. 

During the Corona period and its aftermath, the increase in the value of real estate close to protected areas remained at a similar level, while the decrease in the value of real estate close to agricultural areas decreased, which indicates that buyers have become less selective in relation to the type of open space near which they want to live. "The data show that the trend towards compromising proximity to different types of open spaces began in 2010 and in the Corona years it received a serious boost", confirms Farha. 

The growing demand for residences near various types of open spaces and the rise in real estate prices indicate the lack of open spaces that will worsen in the coming decades. One of Farha's recommendations is actually to put the emphasis on the development of urban areas instead of development at the expense of open spaces in order to preserve as much as possible the open spaces and nature. "The premium is already less than before, and there will always be people who will be willing to pay high prices to live near a nature reserve, but the time has come to invest more heavily in urban renewal and thicken the population in areas that are already built up instead of building at the expense of open areas," he concludes.