Comparing the Value of Natural Capital in South Australian Farmland Using Market Sales and Assessed Valuation

The hedonic valuation method is used to estimate the value of different forms of natural capital (i.e., specifically native vegetation but also soil characteristics, drought, climate and location) on farmland by farm size and industry in South Australia, using agricultural property market sales and assessed value estimates from 2000 to 2013. As expected, higher farmland values were consistently associated with more favourable soil characteristics; higher rainfall; proximity to coast; urban accessibility; higher built-in land production; and a non-linear effect (an inverse U-shape) for maximum temperature. Interestingly, contrasting results were found between native vegetation values estimated using market sales and assessed valuations. An increase in the proportion of native woody vegetation was significantly associated with the per hectare market sale price but at a decreasing rate when the vegetation increased above a third of the property. This contrasts with the assessed values database, where cleared land (decreasing vegetation) was valued higher (but at a diminishing rate). The sales prices of small and medium-sized farms reflected higher values per hectare for native vegetation than large farms—while native vegetation was associated with higher values for grazing and horticulture farm market sales than for cropping farms. The results suggest that, where market sales information is unavailable, assessed valuations may not be effective indicators of native vegetation values—as assessed evaluations tend to undervalue native vegetation on farmlands.