We empirically analyze 7,300 agricultural land sales transactions in 2001 and 2007 to identify factors influencing agricultural land sales prices in Bavaria. To account for the importance of space in land markets, we utilize a general spatial model including a spatial lag and a spatial error. Our findings confirm a significant capitalization of government payments into land prices. A reduction of payments by 50 €/ha would decrease land sales prices by 849 €/ha (280 €/ha) in 2007 (2001). Hence, the 2003 Fischler Reform has increased the capitalization effect. Moreover, we find a strong influence of land productivity, urban pressure and the regional land market structure on agricultural land sales prices.