The weighted average price of land in Ukraine has increased by 10.4% to 38.5 thousand UAH/ha since the beginning of 2023, and the capitalization of the agricultural land market has increased by 115.1 billion UAH, the press service of the Ministry of Agrarian Policy and Food reports.
“The second stage of the land reform will increase the value of privately owned land plots and landowners’ incomes. Revenues to local community budgets will also increase. In addition, Ukrainian agricultural producers will have access to bank lending secured by land,” the Ministry of Agrarian Policy commented on the launch of the second stage of the land market in Ukraine on January 1, 2024.
The ministry drew the attention of communities to the fact that they now have the opportunity to lease communal agricultural land through Prozorro.
“The sale fills their budgets with UAH 355.2 million in revenue annually. And the turnover and use of agricultural land brings communities an average of 10%-12% of the total community budget,” the agriculture ministry said, adding that only 1% of land was sold in Ukraine during the market’s operation, of which 99.5% remained in agricultural production.
As reported, the land market in Ukraine was opened on July 1, 2021, after the entry into force of the Law of Ukraine No. 552-IX “On Amendments to Certain Legislative Acts of Ukraine on the Conditions for the Turnover of Agricultural Land”.
The second phase of the implementation of the Land Market Law started in Ukraine on January 1, 2024: the market was opened to legal entities resident in Ukraine, and citizens were entitled to acquire up to 10 thousand hectares of land instead of 100 hectares in the first phase. The minimum purchase price of agricultural land should not be lower than the NMV (normative monetary value). Leaseholders retain the preemptive right to purchase the land. Foreigners have no right to sell or buy land. The sale of municipal and state land remains prohibited.
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.
The Ministry of Agrarian Policy and Food of Ukraine expects prices on the land market in Ukraine to rise after it opens for legal entities on January 1, 2024, said Denys Bashlyk, deputy head of the ministry for digital development.
“Those who have been waiting for a long time – legal entities that want to own land to be able to develop long-term investment projects – will enter the market. This, of course, will entail a price increase,” the ministry’s press service quoted him as saying.
Bashlyk noted that currently the highest prices on the land market in Ukraine are recorded in Ivano-Frankivsk, Lviv, and Ternopil regions, where they reached $2 thousand, $1.45 thousand, and $1.4 thousand, respectively.
During a press conference at the Ukraine Media Center on Friday, Prozorro.Sale CEO Serhiy But said that almost 38,000 hectares of land had been sold or leased through the electronic auction system. The vast majority of them are assets of local authorities, cities and towns.
“The organizers hold the largest number of land auctions for agricultural land. At lease auctions, the share of agricultural land is 70%, and at sale auctions – 60%,” he said.
In total, the Prozorro.Sale system has already held auctions for the sale of 2.7 thousand hectares of land for a total of UAH 1.3 billion. A total of 35.1 thousand hectares of land have been leased through auctions.
According to Dmytro Makarenko, acting head of the State Service of Ukraine for Geodesy, Cartography and Cadastre, who also took part in the press conference, as of early October 2023, almost 80 thousand hectares of agricultural land have already been sold.
“In 2021, over 100 thousand hectares of land were put into circulation in the first six months of the land market. In the military year of 2022, the market, of course, shrank and 69 thousand hectares were put into circulation. In 2023, as of October, we already see that almost 80 thousand hectares have been sold and the figures are approaching the pre-war levels,” he said.
As reported, the second stage of the land market will start on January 1, 2024, during which legal entities will also be able to acquire ownership of agricultural land with a limit of 10 thousand hectares per person.
At the same time, the sale of state and municipal agricultural land, as well as its sale to foreigners, will remain prohibited. The preemptive right to purchase a land plot belongs to its lessee. The minimum value of land cannot be lower than its regulatory monetary value.
Budgets on the results of more than 5 thousand successful auctions for the sale and lease of land in the system Prozorro.Sales received 1.43 billion UAH, the press service of the JSC “Prozorro.Sales” reported on Facebook on Wednesday.
“Land auctions held in the system Prozorro.Sales, replenished the budgets of different levels for 1.43 billion UAH”, – stated in the release.
It is indicated that 7,971 participants were able to compete in these auctions.
Currently, 778 more auctions are at the stage of concluding transactions. On average, three participants compete for one land lot.
According to “Prozorro.Sales”, the average price growth for completed land auctions is 78.8%.
The leaders in the number of announced land auctions are Kyiv, Odesa, Cherkasy, Lviv and Zakarpattya regions.
As of July 26, 2023 in the system Prozorro.Sales announced more than 1.4 thousand land auctions, which are at the stage of accepting applications for participation.
As reported, from January 1, 2024 in Ukraine will start the second stage of opening the land market, when land will be able to buy legal entities registered in Ukraine. No more than 10,000 hectares of agricultural land will be available for purchase.
The concentration of land in one hand by leasing land plots from their owners over the years of independence has led to the degradation of the Ukrainian agricultural industry, this problem can be solved by legally operating associations of landowners, consolidating in matters of growing and selling crops, head of the Ukrainian Association of Land Owners Roman Holovin said.
At a press conference at the Interfax-Ukraine agency on Thursday, he noted that the main problem of land lease relations in Ukraine is the concentration of land in one hand. Thus, 10% of the country’s agricultural land is concentrated in the ten largest Ukrainian tenants.
In addition, the user of the land, who is not its owner, is not interested in investing in the land asset, as well as in the further processing of agricultural products and the development of animal husbandry, the expert explains.
Holovin specified that the launch of the land market in 2021 did not change the situation for the better for the land owner, but continued the concentration of land in the hands of tenants. With its appearance, the rent for agricultural plots did not increase, the owner of the land did not receive the right to dispose of the land without the permission of the tenant, and the lease agreement is almost impossible to terminate. According to the expert, due to lack of prospects and intimidation by tenants, land owners are increasingly deciding to sell land for next to nothing.
“Ukraine found itself in a situation of a dead end in the implementation of land relations, which led to the decline of the agricultural sector, gave rise to socio-economic and socio-political contradictions and conflicts. Such land relations do not exist in any civilized country,” the head of the union emphasized during the press conference.
Holovin noted that associations of land owners are capable of resolving this issue, which consolidate joint efforts to sell their crops at the highest possible price, resolve the issues of production services and hiring subcontractors, accounting and tax administration. Such public independent management of land through participation in the community of land owners created by Holovin makes it possible to receive profit from the use of land by its owner 2-2.5 times more than non-public (shadow) agriculture, or management through the registration of the land owner as a private entrepreneur.
The community of land owners is a legal entity created by uniting land owners to consolidate the use of land plots in independent agricultural activities, at the same time socially significant for its participants, the society and the state as a whole. The organization is a single taxpayer of the fourth group and a value added tax payer, which implies a special taxation regime for the community and the owner of the land entering it.
“The community does not pay income tax, which means that the owner of the land does not pay it either. The land owner participating in the community does not pay the minimum tax liability (UAH 1,500-2,000 per ha of land), land tax (UAH 300-600 per ha), personal income tax (UAH 2,000-8,000 per ha of land) in the form of a tax liability and does not pay social security tax (22% of income received),” the expert specified.
At the same time, he clarified that community members have the opportunity to sell their crops at market value with VAT refunds, while individual farmers who grow agricultural products without state registration are forced to sell them 40-50% cheaper due to the lack of documents confirming their ownership of the crop.
Also, the community has the right to VAT refunds on the purchase of goods and services, pays a single tax in the amount of 0.95% of the normative monetary value of the cultivated land. In addition, it maintains personal accounting records for each participant, which means accounting for personal expenses and personal profits.
According to Holovin, the above tax and administrative preferences allow a land owner who independently cultivates land through participation in the community to have a significant advantage over illegal land owners and landlords. This way of managing allows him to receive an average of UAH 12,000-20,000 of profit per hectare of land.
According to his calculations, with a crop value of UAH 28,000/ha, the land owner can receive UAH 8,000-12,000 per hectare by optimizing taxation and accounting, and with a crop value of UAH 42,000/ha, he will earn UAH 14,000-22,000/ha.
“In the system of self-management, the income of millions of land owners is significantly increased, control of the agricultural sector and its centralized support are ensured, and most importantly, the country’s food security is guaranteed,” he summed up.
The price of land plots in Kyiv has risen by an average of 5-10% since the beginning of 2021, according to Park Lane real estate agency.
“Land reacts least of all to changes in external factors (economic, political) due to limited supply within Kyiv. Land prices are showing growth, especially with a good location. Liquid land plots can always be profitably and quickly sold,” director general of Park Lane Viktoria Barabash said.
According to the analysis of Park Lane, the most expensive offer is in Pechersky district of the capital – $ 60,000-100,000/100 sq m, in Holosiyevsky district – $ 25,000-50,000/100 sq m, in Solomiansky district – $ 20,000-40,000/100 sq m.
Barabash noted an active demand for the purchase of land within the capital, but the interest in such real estate is lower than in houses or apartments built in residential complexes.
Today there is a choice of land plots in different districts of Kyiv and with a different purpose, ranging from 600 to 92,000 sq m.
According to Park Lane, the most diverse selection of land plots is in Holosiyevsky district (Pyrohovsky Way, Chabanovska Street, Kazatska Street, etc.), Solomiansky (Sovky), in Pechersk (Zverynetska Street, Redutna Street, etc.). Also, buyers are always interested in the land in Osokorky, Rusanivski gardens, where there is access to the water.
