What is currently happening with the demand and prices for agricultural land in Ukraine? Have prices really started to decline, how did the government unexpectedly provoke an increase in land prices, and what can we expect moving forward? This is covered in the review by financial editor RBK-Ukraine Ruslan Kislyak. This information is reported by Kontrakty.UA.
As we approach the third year of full-scale war in Ukraine, prices for agricultural land continue to rise. They were on the rise before, but the access of legal entities to the land market starting January 1 of this year has added internal momentum to this trend. Although the war affects the appetites of potential landowners more like a cold shower than a warm bath, the agricultural land market continues to show slow but steady growth.
In the first month of autumn, information emerged that demand for purchasing land (and consequently prices) allegedly began to decline against the backdrop of farmers' expectations for the availability of state land for long-term lease, but the reality turned out to be more favorable for landowners. Respondents in the RBK-Ukraine survey, including market participants and experts, unanimously assert that demand and prices for agricultural land in Ukraine continue to grow. However, military actions have left their mark on pricing dynamics in different regions.
What is happening with demand and land prices
The price dynamics in the agricultural land market in Ukraine has remained mostly stable since the beginning of the year, although some regional differences are observed. Analyzing the overall market, significant price increases are not expected in 2024, nor are declines observed. The average weighted price has gradually increased by up to 10% since the start of the year, notes Yegor Lisnichiy, commercial director of "Tvoe Kolo" company.
However, a deeper analysis reveals interesting trends.
Currently, there is a stable demand for plots with short-term lease agreements, especially in stable regions with high-quality land. This leads to price increases and heightened competition in this segment. In contrast, plots with long-term lease agreements do not show significant price increases and have lower demand.
There is increased interest in land in central regions of Ukraine. For instance, prices in Vinnytsia and Khmelnytskyi regions have reached their highest levels in 2024 – up to $3100 per hectare (hereinafter referred to as dol./ha). Meanwhile, Sumy and Chernihiv regions continue to demonstrate unstable dynamics with a downward trend due to their proximity to conflict zones.
"Even now, there are investors willing to accept increased risks, purchasing land in these regions, anticipating a high premium for that risk once the situation stabilizes. For example, in Poltava region, one can see how quickly land regains lost positions as soon as the front line moves away from the borders. If in December 2022 prices fell to $1800/ha, by December 2023, they surged to $2526/ha," explains Yegor Lisnichiy.
According to Vladimir Radyko, head of the Concorde Capital "KupyPay" project, the most popular regions in terms of the number of transactions are currently: Sumy, Poltava, Khmelnytskyi, Vinnytsia, and Chernihiv regions. Khmelnytskyi and Vinnytsia regions are the most desired among investors, with the price per hectare holding steady at $1900 – $2100/ha.
"The situation is different in Sumy and Chernihiv regions. Here, demand is maintained by pricing. There are far fewer buyers interested in purchasing plots in frontline areas at pre-war prices. However, many people want to sell their land there," explains the RBK-Ukraine source.
To facilitate transactions, sellers are forced to lower prices, which automatically increases the yield on such deals for investors. The well-known principle applies – the higher the risk, the higher the return. This trend has been observed since 2023, so land prices in these regions have changed little: $1050 – $1200/ha in 2023 compared to $1050 – $1100 in 2024.
At the same time, according to Igor Lisetsky, coordinator of the land committee of the Ukrainian Club of Agrarian Business, the highest prices in Ukraine are as follows: Ivano-Frankivsk region – 111.7 thousand UAH/ha, Kyiv region – 92.2 thousand UAH/ha, Lviv region – 91.3 thousand UAH/ha.
It is important to note that official data on land prices should only be considered in relative terms, as a general trend. Real market prices can be 30-40% higher than officially declared, warns Yegor Lisnichiy. According to a study by the Kyiv School of Economics, only 19% of purchase and sale transactions register the actual price. In most cases, information about the transaction value is entirely absent, indicating a lack of transparency in agreements between parties. Furthermore, 60% of transactions with specified prices set them at the level of the normative monetary valuation, which is the minimum allowed by law.
"This has a simple explanation: the requirement to confirm actual income sources when purchasing land creates difficulties for some buyers. Another factor is tax obligations, which are calculated based on the transaction value. In particular, the increase in the military tax from 1.5% to 5% may exacerbate this trend," says the RBK-Ukraine source.
What influences demand and prices
The price dynamics in the agricultural land market continues to be shaped by both negative and positive factors. The negative factor is, of course, the state of war, combat actions, and mobilization processes, which create uncertainty for investors. However, the opportunity for legal entities to purchase land has provided a positive impulse to the market. New players have emerged, including not only agricultural producers but also other legal entities buying land for investment purposes.
Among other significant factors affecting prices, the competitive environment should be mentioned. In areas with a high concentration of agrarians, prices are rising, while in regions dominated by a single producer, prices remain nearly unchanged.
In the case of land leasing, the duration of lease agreements affects the price – the shorter the term, the more valuable the asset is for the agrarian, while for the investor, it offers more opportunities for optimizing conditions and increasing land capitalization.
"An interesting indicator has been online auctions for leases within the "Land Bank" project, where prices increased 7-10 times during the bidding. Although it is still too early to say whether this is a sustainable trend, the auctions have shown that in highly competitive regions, large agroholdings are willing to pay at least 2-3 times above the average market rental rates," explains Yegor Lisnichiy.
Such auction results create grounds for increasing rental rates for private landowners. This could also lead to an overall increase in market land value. It can be stated that the state land bank has created greater transparency in the market and demonstrated real demand for land.
Currently, we observe a trend indicating the resilience and development of the sector. Firstly, there is a certain stability in leasing relationships. Secondly, even amidst military actions, land prices continue to rise. Thirdly, new investment instruments are emerging, such as the growing popularity of land investment funds.
"And although the activity of private investors may be somewhat reduced due to the current situation in the country, this is compensated by institutional investors and new forms of investing. Overall, the market shows signs of adaptation and development rather than crisis," summarizes Yegor Lisnichiy.
What to expect next
By the end of the year, it is unlikely that we will see drastic changes in land prices in Ukraine. A moderate price increase of 5-10% from the current level is possible in central regions. However, this dynamic may vary depending on many factors, as agreed upon by the market participants surveyed by RBK-Ukraine.
"It should be noted that changes in the taxation mechanism, particularly the increase in military tax, may affect the net profitability of land leasing. Nevertheless, the overall trend of rising prices will persist," believes Yegor Lisnichiy.
In 2025, the land market will likely continue its upward trajectory, with moderate increases in prices and rental rates.
"According to our estimates, land in central regions may increase in value by 8-10% annually in dollars, or 15-20% in hryvnias. The number of attractive land plots with optimal parameters is unlikely to increase, and may even decrease. This will create additional pressure on prices and intensify competition. We also expect rental costs to rise," predicts the publication's source.
Several factors contribute to optimism. Firstly, the auctions for leasing state lands have created conditions where the government itself is interested in regularly reviewing the normative monetary valuation (NMV) of land. This could affect lease agreements where rental rates are tied to NMV, potentially leading to an increase in these rates.
Secondly, those same auctions demonstrated that agrarians can pay significantly higher rents. Therefore, in the