However, land values are notoriously difficult to forecast especially 10 to 30 years in the future which is often required of land purchase decisions. Kastens and Dhuyvetter show that using the historical annual inflation rate for the most recent 30 years is a simple and relatively accurate land value forecasting method. For example, annual inflation from 1968 through 1998 was 4.9 percent. In general, land values are subject to expectations about economic, social, political, and technological conditions. Because these expectations vary widely among potential landowners and across time, land values vary accordingly.
Many factors affect land values, and they can be hard to measure.
Expected agricultural earnings potential, or rent, is probably most important. The concept of rent is as pertinent for owner-operators as it is for tenants. Alternatively, it can be computed as reported rent divided by reported land value. During the same time comparable Texas values were 3.1 percent, 5.9 percent and 1.5 percent. Because land values have risen over time, agricultural landowners get two returns, rents and capital gains.