Buying a dream: How to properly invest in land

Author

Lesia Solovchuk

Land is the last commodity to go up in price when the market grows, and it loses in value first when the market falls. Experts often call it a "semi-finished" investment, since it is not the final product of an investment. This is a place where you can build something with your own hands, making your wildest dreams come true.

has been figuring out how to properly invest in land plots using the example of the capital market that is now experiencing the greatest dynamics in the country.

Terra incognita: Pros and cons of investing

The specificity of private investment in land has always required a clear understanding of what the new owner is going to do with the acquired property. That is, whether the buyer chooses a plot for themselves, will build a house for their family, or whether they buy a plot for the purpose of resale.

However, according to statistics of recent months, only 10% of transactions are signed with the expectation of subsequent resale. According to the President of the Association of Real Estate Specialists of Ukraine Yuriy Pita, in 90% of cases the investor wants to build something on their ground for their own purposes. In this sense, today's investment in land can be defined not so much as expenses, but rather as an investment in the future.

Last year, after a long stagnation, the land market revived sharply: according to statistics, the number of transactions increased by 50%. Of course, the situation was instigated by a lockdown, when a defensive reflex was triggered in thousands of people—there was a need for their own home with access to the picturesque area. Interest in land continues to grow to this day: there is a high demand in all categories of objects—from the cheapest to the most expensive.

"Not having a big budget to buy a house, you can buy a land plot first, and then start building. The land purchase also allows you to build your dream home, equip it and the plot to your liking," Olena Biberova, Director General at the real estate agency Blagovist, says.

Valeriy Zakharov, broker at the company RE/MAX Central, explains that the main advantage of such an investment is the favorable cost of the land. Indeed, though today prices, after a long stagnation, are growing, they have not yet increased to the upper limit. Therefore, there is really an opportunity to buy attractive plots.

According to him, the disadvantages of this tool are both future construction costs and possible risks related to documentation for property rights or geological exploration. Therefore, the experts recommend asking specialists for a serious expertise of the property "passport" and its history.

And a "long" investment is no less important, and its liquidity is significantly lower than the funds invested in a new building, where, having invested at the stage of the foundation excavation, the buyer earns 20-30% of the profit.

Forest, river, and copper pipes: How to choose the right plot

The choice of the plot is based on its natural characteristics and transport accessibility. The ideal property is mainly chosen according to the following criteria:

favourable location—10-20 km from the capital, with an uncongested traffic flow;
complete set of utility lines (not only gas, electricity, and water supply, but also the Internet);
landscape with views and recreational potential: places near a pond or a forest, preferably pine one;
developed social infrastructure (school, supermarket, cafe)
"clean" permits.

According to Valeriy Zakharov, if the buyer is satisfied with the natural location of the site and its landscapes, the most important thing to pay attention to is the availability of all documents that should be double-checked for ownership and corresponding to the intended purpose for development.

For a fulfilling life outside the city, people no longer buy hectares, a plot of 8-15 acres is considered a sufficient size. There is enough space for a future home, a small garden, and even a pool for children—it all depends on the buyer’s needs.

Prices are going up in all segments

Buying plots in the suburbs of Kyiv, according to the experts, is very comfortable today: the supply fully meets the demand in all segments of prices and quality of plots.

With regard to the region, all directions of the capital’s highway are in demand here. As in the beginning of the year, more than 60% of the demand is concentrated on plots of 8-15 acres with supplied communications in picturesque locations 20 km from the city lanes.

In the segment of economy housing, according to Valeriy Zakharov, the Zhytomyr direction is popular—because of the magnificent scenic spots and convenient transport links. Here you can buy plots from $500 per hundred square meters. The most expensive are the plots in the villages of Lisnyki, Kozyn, Khodosivka, and Romankiv along the Obukhiv highway, where prices reach somewhere even up to $50,000 per hundred square meters.

A separate column of demand for land plots of 10-20 hundred square meters right on the territory of the capital with ready-made utility lines for the intended purpose and in the city green zone—for the construction of a residential building as well. But such items appear on the market very rarely.

"Within Kyiv itself, the cost of land on average ranges from $10,000 to $20,000 per hundred square meters, depending on the location. In a 20-kilometer zone around the capital, the average cost is $2,000-5,000 per hundred square meters," Olena Biberova, General Director of the REA Blagovest, says.

Interest in large plots in picturesque places near the capital remains stable—for constructing cottage townships, but the choice of options is also not very large.

To calculate the profitability of a property bought for sale, all its competitive advantages and risks should be taken into account. If the land is bought for the purpose of resale, it all depends on the period the buyer is willing to invest money for. On average, the cost of land for plots in 2021 increased by 10-15%. And if a land plot that is good in terms of characteristics is acquired, then the investor can count on the same annual profitability. However, these are figures of 2021, and price dynamics may change depending on the situation in the market and in the country.