Two months since the land market in Ukraine opened. How is the sale of plots going and is it profitable to buy them

Author

Vadym Makeiev

It has been two months since the land market opened. The most dire predictions did not come true: Ukrainians are in no hurry to sell land plots for next to nothing, aso far they prefer to lease them and wait for a rise in value, as has already happened in neighboring countries.

Recently, the Ministry of Agrarian Policy and Food of Ukraine presented the results of the land market two-month work..

According to the Deputy Minister for Digital Development, Transformation and Digitalization Taras Dzoba, 11,000 transactions for the purchase and sale of agricultural land have been registered in Ukraine. At the same time, in August the area of re-registered lands exceeded the July figures by almost three times: 17,300 hectares compared to 6,000 hectares.

"We see a tendency to almost threefold increase in purchase and sale transactions. One may say that the level of people's confidence in land reform has increased. Today the average number of transactions per day is about 200, the average size of a land plot fluctuates within 2 hectares," Taras Dzoba said.

Poltava region remains the leader, with the largest number of transactions recorded there. This refers to 2,700 hectares, or more than 0.12% of the total area of agricultural land in the region. Kharkiv and Kirovohrad regions are coming next in the top three, 0.10% and 0.09% of the total area of agricultural land in the region, respectively. Commercial land appears in 65% of transactions, personal peasant farming—in 35%.

According to Yaroslav Zhelezniak, Deputy Chairperson of the faction Voice (Holos in Ukrainian), the Ukrainians have taken a wait-and-see attitude.

«Everyone remembers how echelons of foreigners who would come and buy up all the Ukrainian land terrified us. As you can see, during two months the terrible predictions did not come true. We at Holos initially supported the opening of the land market. We were sure that Ukrainians are smart and will not immediately sell land at a low price. And now the state of the market confirms this. Ukrainians see how much land is worth now and see how much land is worth in neighboring countries a few years after the market opened. Now, two months after the opening, the average price in Ukraine is somewhere around $1,300 per hectare. If you look at the neighbouring Bulgaria, Romania, and Poland—this is from 5,000 to 12,000-13,000 euros per hectare. Therefore, it is logical that Ukrainians prefer to lease it for the time being.»

Yaroslav Zhelezniak

Deputy Chairperson of the faction Voice

Yaroslav Zhelezniak

Deputy Chairperson of the faction Voice

Former Acting Minister of Agrarian Policy and Food Olga Trofimtseva notes that the official figures of the Ministry of Agrarian Policy are somewhat exaggerated, the real data will be slightly less. There is more or less predicted activity on the market without a surge of interest.

«As expected, the Ukrainians—land share owners are wary of the possibility of selling land, and, on the other hand, we see that there is interest primarily from large and medium-sized enterprises that would like to consolidate or regroup their land banks somewhere. Accordingly, they are trying to somehow do these things through individuals.»

Olga Trofimtseva

Director for Development of Epicenter-Agro

Olga Trofimtseva

Director for Development of Epicenter-Agro

Buying land can be a profitable investment, experts say. The following are among the main advantages of such investments: high liquidity, stable rental income, as well as additional income from rising market prices, and the advantages of real estate—protection from risks and depreciation.

"It takes time for the market to grow. Experts predict a 7 to 20% increase in prices. But this is a long game and we will see the effect of the market opening and active purchase and sale transactions in a few years," Zhelezniak says.

From the investment attractiveness point of view, the purchase of land can be interesting for investors who want to buy a small land plot or as an investment of a small amount of free funds, Olga Trofimtseva believes.

"On the whole, I am quite restrained now in assessing the investment attractiveness of the land market because of the work in a reduced format (only individuals, 100 hectares) and gaps in the market regulation," she explains.

For individuals willing to buy land, the lawyer of the Investment Service Ukraine law firm Oleksandr Muravskyi identifies a number of factors that should be taken into account when buying the land:

Firstly, market participants are obliged to settle payments for land exclusively in non-cash form; cash payments are prohibited by law. Therefore, sellers who have expressed a wish to sell their land are unlikely to be able to avoid paying taxes, and buyers need to confirm the fund sources legitimacy, since banks will carry out financial monitoring of transactions.
Secondly, it is extremely important to carefully check the documents of title to the land plot for their compliance with the criteria established by law.
Thirdly, it should be additionally recalled that for tax purposes, before concluding an agreement of sale and purchase of a land plot between individuals, one should also carry out its expert assessment.

Context.

The land market has started working in Ukraine since July 1. has compiled basic information about the land market you need to know: data on agricultural land prices, paperwork, and taxes.