Business news from Ukraine

Cost of land in Ukraine increased by 10.4%

The weighted average price of land in Ukraine in January-September 2023 increased by 10.4% to 38.5 thousand UAH/ha, according to a report on the state of the land market in Ukraine, prepared by experts of the Kyiv School of Economics (KSE) with the support of the USAID AGRO Program.

Analysts noted that 31.1 million hectares of land in Ukraine are privately owned, so a 10.4% price increase is equal to an increase in the capitalization of the agricultural land market by UAH 115.1 billion, which corresponds to about a tenth of the country’s general budget revenues in 2023.

“In September 2023, the weighted average price of one hectare of all agricultural land amounted to UAH 38.45 thousand. At the same time, the weighted average price of land designated for commercial agricultural production was higher than the average and amounted to UAH 39.0 thousand per hectare. This means that “commodity” land is valued by the market somewhat more than other types of agricultural land in Ukraine,” the study says.

According to KSE experts, the highest prices for agricultural land are observed in Ivano-Frankivsk, Lviv, Volyn and Ternopil regions, as well as Kyiv and Poltava regions. The lowest prices are in the areas affected by hostilities and in the frontline regions.

According to the study, in the third quarter of 2023, 21.4 thousand transactions of sale and purchase of agricultural land covering 43.5 thousand hectares were carried out, which is slightly different from the second quarter, when 44.0 thousand hectares of farmland were sold under the same number of sale and purchase agreements. At the same time, in the second and third quarters of 2023, the land market was significantly more active than in the first quarter, when 15.7 thousand transactions with a total area of 32 thousand hectares were concluded.

In the fourth quarter, the land market may grow even more, as after the harvest is over and additional resources are released for land purchases, buyers are expected to become more active and demand for land plots is expected to increase, KSE predicts.

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Cost of Ukrainian timber almost halved due to war and changes in external situation – head of Forest Agency

Due to the war and changes in the external situation, the cost of Ukrainian timber has almost halved, warehouses are full, the processor dictates conditions on the stock exchanges, head of the State Forestry Agency of Ukraine Yuriy Bolohovets described this new situation on the market in a column in NV Business.
“Taking into account the depreciation of the hryvnia against the dollar, the cost is almost halved. Instead of a seller’s market, we are seeing the formation of a buyer’s market. The share of reductions is growing on the exchanges: the processor is already dictating the terms,” he wrote.
Bolohovets clarified that out of the volume of unprocessed wood put up for auction, on average, 60% can be sold on the first attempt, and 50% – processed – 50%.
In his opinion, the reasons for this transformation of the market are the end of the era of “covid” repairs in the United States and other countries, the rise in the price of mortgages and the reduction in construction, the decrease in demand for building materials, in particular, Europeans do not invest in housing due to a jump in lending rates and the risk of war.
“In China, a crisis is brewing in the field of housing construction. Against this background, the Celestial Empire is flooded with a stream of cheap timber from Russia, which is ready to give up its own resources at a big discount. The situation is no better for us in other Asian markets,” the head of the State Forest Agency explained.
He added that the Turkish market, in addition to the Russian one, is also “overwhelmed” with Belarusian products, which then, bypassing the sanctions, enter the European market.
The head of the State Forestry Agency stressed that the main factor in the negative trends in Ukraine is the war and the blocking of ports, without which the country cannot export raw materials to Asia.
“The alternative export route through Gdansk is frankly unprofitable, logistics eats up all income,” Bolokhovets stated.
At the same time, according to him, as a result of the program of anti-crisis measures, forestry enterprises in June reached the volume of harvesting at the level of 90-92% of the previous year. In particular, enterprises in the Chernihiv and Sumy regions, the northern part of the Kiev region have resumed full-fledged work, logistics are being established to raise sales prices in problem regions.
The head of the State Forestry Agency specified that according to the results of the first half of the year, harvesting decreased by 20% (the largest drop in Kyiv, as well as Chernihiv, Sumy, Kharkiv regions, where shelling or hostilities continue). However, due to the transition to auctions for all types of products, revenue increased by UAH 1.45 billion compared to the first half of 2021: 4.4 million cubic meters of raw wood were sold. m in the amount of UAH 8.5 billion, which allowed to increase taxes by UAH 1.2 billion and net profit from UAH 215 million to UAH 350 million.
Speaking about the steps being taken to contain the situation, Bolohovets announced a shift in emphasis to logging, which is in great demand, and primarily to hardwoods: if an almost stable increase in value is recorded for oak during trading on the stock exchange, sometimes by 30-60%, then pine and spruce are bought at a price close to the starting one.
According to him, production will be reoriented to more popular types of products, such as blanks for euro pallets.
He added that sales of firewood are on the rise, as there is a “crazy” demand for firewood, pellets and other raw materials for heating in Europe amid declining interest in construction timber.
The head of the State Forest Agency also called for a more active fight against sanctioned wood from Russia and Belarus on the European market, for revitalizing the domestic market by restoring damaged housing and building temporary timber, which can then be reused.

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CONSTRUCTION INDUSTRY IN UKRAINE DECREASED BY 70%, WHILE COST INCREASED BY 20% – EXPERT

During the three months of the war, the construction industry of Ukraine has decreased by more than 70%, despite the point resumption of work at construction sites in Ukraine, while the cost of construction has increased by 20%, said Sergey Pilipenko, general director of the Kovalska group.
“I can state that, despite the statements of individual developers about the resumption of work, including Kovalska, the market has declined by more than 70%. This is if we consider the volume of construction work, the consumption of building materials,” Pilipenko said during online conference “Marshall Plan” and urban prospects of Ukrainian cities after the war: economic and urban strategies” on Thursday.
According to him, the cost of construction of facilities has increased by more than 20%, including due to a significant increase in the cost of building materials, logistics, inflation and the growth of the exchange rate.
The expert pointed out that the primary real estate market has actually stopped. “So far there are no signals for a quick exit from this state,” he said.
Pilipenko believes that the increase in the discount rate to 25% actually made it impossible to finance the business, so investment in new projects is in question. In addition, there are still no mechanisms for financing restoration projects by foreign states and investors.
In his opinion, in the near future the main construction activity will be projects of emergency repairs, dismantling, erection of temporary structures.
“Really assessing the situation, the state, in the context of ongoing hostilities, cannot fully and large-scale finance any restoration projects. It does not have the funds for this, and now the priorities are different. Therefore, from the point of view of construction activity, maximum developers can count on emergency repairs, dismantling or construction of temporary engineering structures, bridges,” he said.
PSG “Kovalska” has been operating in the construction market of Ukraine since 1956. It unites more than 20 enterprises in the field of extraction of raw materials, production and construction. The products are represented by the brands “Beton ot Kovalskaya”, “Avenue”, Siltek and others.
Enterprises of “Kovalska” work in Kyiv, Zhytomyr, Lvov, Kherson and Chernihiv regions. The total number of employees is 5 thousand people.
In addition, the group includes Kovalska Real Estate, which is engaged in the construction of residential facilities in Kyiv. Her portfolio includes 20 completed residential projects.

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COST OF MILK IN UKRAINE GROWING AMID LOW PURCHASE PRICES – PROFILE ASSOCIATION

A cost of raw milk produced in Ukraine is constantly rising under the influence of a number of factors, while the purchase prices for it have fallen since the beginning of Russia’s military invasion of Ukraine, the Association of Milk Producers (AMP) said.
In its analysis of the milk market, published on the website of the association, it is noted that although this situation creates pressure on the market, however, since the second decade of April, it has been developing “in the tones of very restrained optimism.”
According to it, the average purchase prices for milk as of April 20 are: extra-class – UAH 10.13/kg, top-class – UAH 9.88/kg, and first-class – UAH 9.40/kg (excluding VAT). At the same time, in the country they fluctuate in the range of UAH 9.5-10.7 /kg (excluding VAT) for extra-class raw milk.
The association notes that the cost of milk production is constantly growing, which is influenced by several reasons at once. Since the beginning of Russian aggression in Ukraine, prices for fuel and veterinary drugs have increased significantly, and the blockade of the export of agricultural products from Ukrainian seaports deprives agribusiness of working capital, the report explains. In addition, in March, due to the war, the cost of milk was affected by a forced revision of the feed ration of cows, changes in the structure of the payment of wages to staff, as well as the transfer of part of milk free of charge in the form of humanitarian aid.
According to AMP, the issue of raw milk cost “so far looks like a snowball that accumulates in the absence of a sufficient level of purchase prices.”
The association assumes that in the near future the milk market in the country will develop under the pressure of the following factors: the nature and intensity of hostilities, the possibility of unblocking seaports and resolving issues of exporting dairy products.
“The market began to feel the demand for dairy products and improved sales conditions in the occupied areas. With the increase of demand and sales, we see an increase in the supply of raw milk. Of course, these are not pre-war prices, but not the prices of the first weeks of UAH 8,” AMP said.

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COST OF HOUSING CONSTRUCTION IN AUGUST INCREASED BY $100-120 PER SQUARE METER

Increased demand for high-quality housing projects, rising prices for basic building materials and finishing work, an increase in the salaries of specialists led to an increase in the cost of housing construction in August by $100-120 per square meter compared to July 2021, Commercial Director of Intergal-Bud (Kyiv) Hanna Layevska said.
“We calculated that over the past month, the cost of housing construction has increased by $100-120 per square meter. And this is facilitated by the increase in prices for basic building materials and work,” she said during a discussion panel at the RED x LUN summer camp.
The increase in prices is also influenced by the intensification of demand for high-quality and modern projects, including in the form of investments in real estate. According to the director, developers are investing in the development of interesting concepts with a developed infrastructure, including additional comfort and service.
In addition, developers are more careful in choosing plots for complex development, says Intergal-Bud.
Intergal-Bud has been operating in the residential real estate market since 2003. Its portfolio includes 74 completed projects with a total area of over 3 million square meters. The company has built 158 houses (Kyiv, Kyiv region, other regions of the country).

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COST OF UKRAINIAN LAND AFTER LAUNCH OF MARKET WILL BE $2,200/HA

Experts estimate the average cost of 1 hectare of agricultural land after the opening of the land market on July 1 at $2,200, by the end of the year its cost will reach $2,500/ha, co-founder of the Land Club association of land investors Oleksandr Kolotilin has told Interfax-Ukraine.
“The start of the market is on average planned at the level of $2,200 per ha. But at the same time, it must be clearly understood that the agricultural land market existed before July 1, 2021. Still, 5 million hectares of land allocated within the framework of free privatization for private farming for all the years of Ukraine’s independence is also a sufficient amount of land. Thus, the price of land that was under the moratorium correlates with the market that has existed all this time,” Kolotilin, who in 2017-2019 was the acting head of the State Service of Ukraine for Geodesy, Cartography and Cadastre, said.
He clarified that the opening of the land market will be beneficial primarily to its sellers, since at the first stage of the land reform implementation there will be no more than 10% of the total number of interested parties who want to sell their shares.
“Since there are many more people who want to buy or invest in agricultural land today than offers, this will gradually push the price up. I do not think that by January 1, 2022 the situation will change dramatically, but it is definitely worth expecting an increase in prices. On average, the price will reach the level of $2,500/ha,” the expert noted.
According to him, in different regions and even different districts of the same region, the cost of land differs quite strongly.
“If, for example, in the north and center of Ukraine land prices are high and growing, in the south, in the zone of risky agriculture, in the zone of difficult access to moisture, where there is the need for serious investments in land reclamation, they are lower. Today the average price in central Ukraine is $2,000-2,500, in the north – $1,700-2,200, and in Kherson region I’m not sure that someone will pay more than $1,000 per hectare without access to moisture,” he noted.
The expert said that he does not expect a rush to buy land in specific regions. According to him, the greatest demand for agricultural land will remain in the central, northern and western parts of Ukraine.

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