Cities and the Urban Land Premium

Cities and the Urban Land Premium

Henri L.F. de Groot, Gerard Marlet, Coen Teulings and Wouter Vermeulen

After a long period of suburbanisation, cities have been in vogue again since the 1980s. But why are people prepared to spend far more money on a small house in the city than on a large house in the countryside – and why doesn't this apply to all cities? This book shows that the appeal of the city in the 21st century is not only determined by the production side of the economy, but also by the consumption side: its array of shops, cultural activities and, for example, an historic city centre. All these factors not only translate into land prices that are worlds apart but, in terms of production, into different wages for urban and rural citizens. This book maps out these differences.

Chapter 2: Land underneath the city

Henri L.F. de Groot, Gerard Marlet, Coen Teulings and Wouter Vermeulen

Subjects: economics and finance, urban economics, urban and regional studies, cities, urban economics


Corn is not high because rents are high, but rents are high because corn is high. David Ricardo, 1817. Where harvests are plentiful, agricultural land is expensive. Where people like to live, the land underneath their homes has great value. It is not the land prices that dictate those for homes, but it is the popularity of the dwelling and its location that determine the land price. Contrary to what policy makers often believe, high land and house prices are not an indication of a city in trouble, but rather that it is doing very well. Dutch cities are indeed doing very well. But things have been different. In the 1960s and 1970s, a suburbanisation wave hit the Netherlands; the countryside was winning ground over the city. As increasingly more people could afford a car, increasingly more people could afford to live in a larger home in a green environment at a greater distance from their work in the city. Moreover, employment in, for example, the shipyards in northern Amsterdam was also rapidly declining. The major cities in the Netherlands, such as Amsterdam, lost perhaps a quarter of their population at this time (Figure 2.1).

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