On July 1, Ukraine finally left the small club of six countries where the sale of farmland is still prohibited.
From now on, Ukrainians can start buying and selling land, as the 20-year moratorium on land transactions has officially been lifted.
A year ago, parliament passed a law lifting the moratorium after a heated debate and consideration of more than 4,000 amendments. Ending the ban on land sales was a requirement for receiving a loan from the International Monetary Fund in the fight against the pandemic.
“66% of the entire territory of Ukraine was under a moratorium,” said Oleg Nivievskyi, an assistant professor at Kyiv School of Economics. “This is a colossal economic resource that Ukraine has not used.”
Currently, Ukraine has 42 million hectares of farm land. Officially, large agro-corporations operate on 6 million hectares, small and medium agro-companies — on some 11 million hectares.
The rest is in the shadows. As a result, the state budget looses up to $815 million in tax revenues annually, according to the Ukraininan Agri Council.
Since 2001, “clans of officials” have privatized over 5 million hectares, Ukraine’s Minister of Agriculture Roman Leshchenko said during a TV talk show last October.
“When there is a civilized market, these risks will be much lower,” said Nivievskyi, who estimates that the economic effect of opening the land market will bring an additional $ 2 billion annually.
Prime Minister Denys Shmyhal called the opening of the market “the most important reform in the history of independent Ukraine.”
“There is not a single successful country with a moratorium on the land market,” said Shmyhal during a government meeting on June 30.
Rules of the new market
In the first phase of the land market opening, only Ukrainian citizens will be able to buy land, and not more than 100 hectares per person.
Starting from January 2024, companies registered in Ukraine will gain the right to buy land too. The limit of the land will also increase, up to 10,000 hectares.
Foreigners won’t have the right to buy land until the country holds a nationwide referendum.
According to results of a survey conducted by the Rating sociological group earlier this year, 79% of citizens were against granting foreigners the right to buy land in Ukraine.
And even if the results of the referendum end up in favor of foreigners, they still won’t be able to buy land in the 50-kilometer border zone.
A week prior to the official opening of the land market, Dmytro Dubilet, co-founder of virtual bank Monobank, announced the launch of Dobrozem. It is an online platform that provides information and consultancy on future sales, Kyiv Post reported.
The service will help to check if everything is right with documents, as well as match sellers and buyers.
“The service will help at all stages of land sales,” wrote Dubilet on his Telegram Channel.
For Ruslan Golub, director of TAK, an agro-company operating on 8,500 hectares in Kyiv, Kherson and Odesa oblasts, it is still unclear how the land market will work.
But he is also ready to start buying land from people who need money more than land.
“Any propositions we receive, we’ll buy,” said Golub.
A standing start
After the launch of the land market, prices won’t skyrocket, Nivievskyi from Kyiv School of Economics said.
He estimates that prices for land will increase by no more than 10%. On average, the price for one hectare will range between $2,000 and $2,500.
Sergiy Vakhniy, owner of the Tomilivske agro firm that operates 550 hectares of farmland near the city of Bila Tserkva in Kyiv Oblast, is ready to buy the land the company currently leases.
He has already asked one of Ukraine’s banks for a $50,000 loan to buy up to 40 hectares from leasers. Despite the lift on the ban of land sales, only around 5% of leasers are currently willing to sell their land to Tomilivske.
“People are still going to wait for the prices to rise so they can buy an apartment after they sell their land,” said Vakhniy. “Most often, some family tragedy or health issue eventually forces people to sell their land.”
Looking into other countries’ experience where a land market was launched, the annual turnover on farmland market is around 1%. But for the first two-three years it may be up to 5%.
“In the beginning, there may be a lot of transactions in Ukraine, but in a few years everything will normalize,” said Nivievskyi. “This is an adaptation period.”
The economist believes that opening the land market in Ukraine was the result of massive political change in the country. “This was not the case with (ex-President) Petro Poroshenko: he supported the land reform only in words, but in reality nothing was done,” said Nivievskyi.
