What Drives the Conversion of Agricultural Land in Peri-Urban Areas? A Hedonic Pricing Analysis from Central Java, Indonesia

Department of Economics, Faculty Economics and Business, Universitas Muhammadiyah Yogyakarta, Indonesia

^* Corresponding author: endahsaptuty@umy.ac.id

Abstract

The conversion of agricultural land in peri-urban areas of developing countries has profound implications for rural livelihoods, environmental sustainability, and food security. This study examines the economic valuation of farmland in Mertoyudan District, Magelang Regency, Central Java, Indonesia, which faces increasing conversion pressure, using the Hedonic Price Method (HPM). Employing 405 observations, three hedonic pricing models linear, semi-log, and log-log are estimated to analyze the effects of physical, locational, and environmental attributes on land prices. The results indicate that while variables such as land productivity and plot size exhibit low significance, proximity to major roads, markets, and green open spaces significantly increase land values. These findings suggest that the land’s development potential outweighs its agricultural function, driving unsustainable land transitions. Consequently, farmland is increasingly commodified as an urban asset rather than a means of food production. To address this issue, strong policy interventions are essential, including zoning regulations, land-use taxes, and the integration of environmental externalities into property valuation. Such measures are vital to safeguard agricultural landscapes, ensure sustainable urban growth, and strengthen local food resilience amid rapid urbanization pressures.