Will it ever be bought? The war and the land market: what was expected and feared
"Who will buy it now?", - Hanna sighs bitterly. She regrets that her mother did not sell her agricultural plot as soon as the Ukrainian state allowed it to be done legally. The plot consists of excellent black soils in the Pokrovsk district of the Donetsk oblast. This is precisely the area where the russian horde has been advancing for several months.
In four partially occupied regions in the east and south, land sales are nonexistent. The number of transactions since mid-2021 is the lowest in Ukraine—less than 1,500 in the Luhansk oblast and just over 5,000 in the Kherson oblast. Compared to other regions, this difference is significant, although the market has declined everywhere. The situation will not change quickly even if the war ends and territories are liberated, as almost a large portion of agricultural land in these areas will require lengthy and expensive demining, reclamation, and similar processes.
There will likely also be questions regarding property rights and usage.
In the long term, a fully functioning land market promises many benefits for Ukraine's agricultural sector. If landowners gain access to credit, if investors see safety for their investments, Ukraine will eventually shift from primarily growing and exporting seeds and raw materials to growing and supplying high-quality consumer products to both domestic and international markets—products that it is currently forced to import, says Ihor Lisetsky, coordinator of the Land Committee at the Ukrainian Agribusiness Club Association.
But beyond that, government agencies will evidently still need to prove the guaranteed protection of the rights of all participants in land relations.
Big changes are still awaited
The moratorium on the sale of agricultural land, which had been in place in Ukraine for 20 years, was lifted in July 2021. The land reform is being implemented in three phases and is still ongoing. Initially, land purchases were allowed only for individuals, and even then, no more than 100 hectares per person. Since this year, companies are also permitted to buy land, up to 10,000 hectares. The final phase—opening the market to foreigners—has not yet been scheduled.
The start of the reform was delayed for a long time due to political manipulation. The reform faced influential opponents who conducted information campaigns, convincing the public that opening the market would lead to Ukrainians and Ukraine losing a valuable resource, the destruction of small farms, and the displacement of people from rural areas, with large foreign companies supposedly buying everything up.
Supporters called for common sense, reminding that the agricultural land market operated in the 1990s, but only a small percentage of agricultural land was bought, and it was the lack of such a market that was harming the Ukrainian agricultural sector and exploiting landowners due to low rental prices and widespread shadow schemes. According to the analytical platform Vox Ukraine, before the land market was opened, 75 percent of agricultural land was owned by individuals, but only 29 percent of such land was cultivated by the owners themselves; the rest was rented out.
In reality, most landowners preferred rental arrangements: some planned to eventually cultivate their land themselves; for many, especially retirees, a regular additional income was crucial. There was no rush in the market overall, nor in specific regions or communities, either in the summer of 2021 or later.
The large-scale war has slowed the market and frozen prices. The number and area of sold plots are gradually increasing, but not at the scale they would in relatively peaceful times, comments Ihor Lisetsky. The price of black soil hectares also seems to be rising, but more due to changes in currency exchange rates, with landowners preferring to rely on the dollar rather than the hryvnia, he adds. In November 2021, at the height of market activity, one hectare was sold for just over UAH 35,000 on average; now it is sold for almost UAH 41,000, according to data from the State Service of Geodesy, Cartography, and Cadastre.
According to the Service, the most expensive plots, averaging from UAH 92,000 to 106,000 per hectare, are currently in the Kyiv, Lviv, and Ivano-Frankivsk oblasts, but only in the Kyiv oblas lands are actively being sold, albeit in small parcels. Leading regions by the number of transactions (26,000-27,000) include the Vinnytsia, Khmelnytskyi, and oblasts, while the Dnipropetrovsk and Poltava oblasts lead in the total area of sold agricultural lands. Transactions have also been numerous in the Sumy, Kharkiv, Dnipropetrovsk, and Zhytomyr oblasts, with the largest area sold in the Kirovohrad oblast.
Before russia’s full-scale invasion of Ukraine, the Kharkiv oblast was a leader in Ukraine for the number of land transactions. When russia occupied part of the region in 2022, the farm that rented land from Svitlana and her mother was also under occupation. Svitlana did not receive rental payments that year – she says she did not expect to. As she emerged from the occupation, Svitlana’s mother saw blackened, burned fields in those areas.
Like most other landowners, Svitlana inherited the land from her grandmother. She says she also inherited the tenants. She knows nothing about their affairs but receives rental payments on time, and the amount is satisfactory. It amounts to UAH 11,000 per year for five hectares. Svitlana grew up and lives in the city, but she hopes that one day she might have her own farm on this land, she reflects.
"I don’t know where it came from, but I love this land. When I moved into my new house, there was a small patch of land that was covered in glass, and I felt such pity for it, almost physical pain. As I cleared the glass, I realized how much I love the land. Therefore, I would only sell it if I had no other choice", - she says.
Ihor Lisetsky suggests that since February 2022, land sales are largely preferred by those who are moving to safer places due to the war and are losing connection with their native regions. Companies are also selling, despite concerns that they would rush to buy. Even with the market open to legal entities, physical persons still make up the majority of buyers, notes Lisetsky.
People buy where they want to sell, with 70-80 percent of the purchases aimed at renting out the land, generating passive income, and potentially reselling in the future, continues Lisetsky. Rental prices are not rising yet due to additional costs borne by farmers because of the war: for generators, transportation, and so on. However, land prices will significantly increase as soon as the war ends—primarily due to European integration, he is convinced. Today's buyers are counting on this as well.
Conditions favorable to raiding
Iryna Antsyfrova, a public activist from Marhanets in the Dnipropetrovsk oblast, inherited two land plots from her mother. They are small, but located in an area that until recently was the shore of the Kakhovka Reservoir. The woman says that even in 2019, people wanted to buy them from her, when there was a moratorium on land sales in Ukraine. She refused to sell. She dreamed of someday having her own greenhouse on the plots, and in the meantime, she rented them out to a company owned by her parents' friends.
In 2023, Iryna was surprised to see in the State Land Cadastre that her plots had a new tenant, even though none of the lease agreements she signed with the previous tenant had expired. The new company had a name similar to the one that rented the plots from Iryna previously, but it was a new company registered in February 2023. Its manager and owner turned out to be, respectively, a deputy of the Marhanets City Council and the son of the Marhanets mayor. Data aggregators from state registers showed that the new LLC managed almost 500 more land plots in the Nikopol district, to which Marhanets belongs. The Marhanets mayor has significant influence there.
The woman suspects that, like her, the owners of most, if not all, of those plots did not sign, and perhaps did not even see, the new lease agreements. Iryna is not familiar with other local landowners, so she cannot verify her suspicion. She has not lived in or visited the area for a long time, but she knows that many recent local residents also left because of the war.
Iryna does not understand why anyone would want land near the now-dry reservoir, in an area where planting and harvesting are impossible due to constant shelling: directly across from her plots, on the opposite bank of the Dnipro river, is occupied Enerhodar. But farther from there are quite peaceful fields, says Iryna, and now all the land there is controlled by the mayor's son. Even if she wanted to sell her plots, she says, in these conditions, there would be no other buyer except the unrecognized tenant, who has effectively created a monopoly, has legal priority to buy, and will dictate the price because of this.
The woman wants to challenge the falsification in court but lacks the means to sue the wealthiest people in her hometown.
Thus, the war, which has interfered with land reform, not only forces the legal owners off Ukrainian land, contaminates it, destroys formerly strong farms and the infrastructure they relied on but also fosters unfriendly encroachments on others' property within the country, where nothing, perhaps, still protects the most vulnerable.
By Yuliia Abibok, OstroV