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.
After the moratorium on the alienation of farmland is lifted on July 1, the parties to the transaction for the purchase of a land plot will need to pay 5% personal income tax and 1.5% military duty, taxes and fees will be calculated from the cost of the plot specified in the sale and purchase agreement, according to the Facebook page of the Ministry of Justice.
The ministry said that the military tax shall be paid even before the moment of notarization of the land alienation agreement.
The Ministry of Justice said that the basic calculated value for taxation of transactions for the purchase of land will be the price specified in the purchase and sale agreement, which cannot be lower than the assessed value of the land calculated by the authorized body.
According to the ministry, the legislative algorithm for taxation of land transactions also provides for a number of benefits.
“The owners of agricultural land plots and land shares received as a gratuitous transfer in accordance with Article 121 of the Land Code of Ukraine are exempted from taxation. Benefits, under certain conditions and only once a year, can also be used by persons who received such plots in the course of privatization,” the ministry said.
In connection with the launch of the land market in Ukraine, which will start working on July 1, the Ministry of Agrarian Policy and Food, the Ministry of Justice and the State Tax Service will publish clarifications on a number of important issues related to the sale of land, Prime Minister of Ukraine Denys Shmyhal said.
“Next week, the land market will start working in Ukraine. From July 1, Ukrainians will be able to exercise their legal right and independently dispose of land plots. In this regard, this week I instructed the Ministry of Agrarian Policy and Food, the Ministry of Justice and the State Tax Service to issue clarifications on the launch of the land market, the work of notaries and maximally assist in resolving issues that Ukrainians may have,” Shmyhal wrote on Facebook on Sunday.
He noted that the government has also made changes to the procedure for maintaining the State Register of Rights to Real Estate, which will ensure the correct sale procedure and the correct disclosure of all information in the register.
Prime Minister Denys Shmyhal instructed the relevant ministries and departments to issue clarifications regarding the launch of the land market.
“In less than a week, the land market will start operating in Ukraine. We held a preparatory meeting with representatives of ministries, the President’s Office, the NSDC secretary and members of the specialized committees of the Verkhovna Rada,” Shmyhal wrote in his Telegram channel.
The prime minister said that he instructed the relevant departments to pay special attention to the process of starting the reform.
“He also instructed the Ministry of Agrarian Ministry, the Ministry of Justice and the State Tax Service to issue clarifications regarding the land market, the work of notaries and to maximize the resolution of issues that Ukrainians may have,” he said.
Citizens of Ukraine are afraid that the land will be bought by foreigners, and this is one of the main reasons why two-thirds of voters in the “land referendum” will vote against the sale of land, which now embodies power, Director of the Rating sociological group Oleksiy Antypovych said.
During the roundtable conference titled “Ukrainians’ Attitude to Land Market” hosted by Interfax-Ukraine, commenting on the results of the survey published the day before, which his company conducted at the end of April, the sociologist said that 77% of residents support the referendum against the sale of agricultural land and 75% intend to take part in it.
“We asked very clearly, how would you vote in a referendum on such a question: ‘Do you support the introduction of a market for the purchase or sale of agricultural land in Ukraine?’ We see that 36% would vote for the introduction of a land market, while 64% would vote against it. Two-thirds are against, a third are for,” Antypovych said.
According to him, Ukrainians are especially frightened by the intention to allow the purchase of Ukrainian land by foreign citizens and companies, some 79% of respondents are against this.
“The fear that the land will be bought by foreigners is one of the main factors causing great resistance or great disagreement by Ukrainians to the idea of selling land, and there is no difference between residents of the West or the East, or respondents from different age groups,” the sociologist said.
It is planned that the land market in Ukraine should start working as early as July 1, 2021.
The participants of the event said the amendments to the Land Code, recently adopted by the votes of a mono-majority, allowed the sale of Ukrainian land to foreigners, canceled the ban on the sale of especially valuable land and provided the preferential right to purchase land to persons who are going to be engaged in mining.
At the same time, the parliamentary faction of the Batkivschyna party of Yulia Tymoshenko, which was the only one in the Verkhovna Rada that did not give a single vote for any “land” law, is now organizing an all-Ukrainian referendum in defense of the land.
Tymoshenko’s team has already opened a special hotline and has appointed a meeting of the initiative group, which already has more than 12,000 people, for May 22.
Prime Minister of Ukraine Denys Shmyhal expects that the opening of a land market in the country will bring $85 billion of additional GDP in 10 years, and the average cost of land per 1 ha will increase fivefold.
“Ukraine has underutilized its land potential of $85 billion. In 29 years, free disposal of land has been limited, which means that its value has been underestimated several times. During this time, more than 5 million hectares of land have disappeared from the state. Development of irrigation and investment in agriculture has slowed down for decades, and partially stopped at all,” the prime minister said during the presentation of the Audit of the Ukrainian economy and vectors of economic development until 2030 in Kyiv on Friday.
According to the published document entitled “Audit of the Economy of Ukraine”, the fair value of Ukrainian land is currently $4,960 per hectare with a standard monetary value of $955 per hectare (2018).
At the same time, since the model of the land market adopted by the government has several fundamental restrictions (a ban on legal entities from buying land until 2024, a complete ban for foreigners, restrictions on the maximum areas to purchase), the price of land will not reach its fair value in the near future.
Thus, according to the land market model adopted by the Cabinet of Ministers, the price of one hectare is predicted to increase to $2,350 in the tenth year after the implementation of the reform.
Untapped potential of using water, forest resources in Ukraine is $12 bln, $40 bln respectively – PM.