The Role of the Property Tax in Urban Land Speculation

Abstract

This article reports the results of an extensive survey of owners of undeveloped land in and outside the Shashemene City. After identifying several distinct owner types, the authors demonstrate that changes in ownership, as well as in the character and use of land, begin more than twenty years before the rural countryside is actually converted to urban use. These findings have important implications for the design and implementation of policies attempting to control or direct urban growth. In particular, a simple dynamic model that explains the optimum length of time to hold a parcel of land from a market was developed and its properties were analyzed both qualitatively and numerically. One finding is that the speculator will hold the land for the marginal period only if the difference between present net rates of return exceeds the difference between discounted expected per cent returns. On the other hand, if land speculators held land for one year, property tax increased by 0.000079 birr per year, which is inappropriate methods to control land speculation .

Keywords:  Land speculation; Model; Property tax; Speculators; Sprawling.

DOI: 10.7176/JEES/9-1-05