Land boom: why Ukrainians buy land rather than real estate
18 February 13:42
The purchase and sale of land plots increased by 18% last year. According to statistics, 273 thousand land transactions were concluded last year. Despite the fact that land was bought and sold by 11% less than in 2021, since the opening of the land market, when notaries certified 306 thousand sales deeds, investments in land have exceeded investments in real estate in popularity. What is the reason for the hype,
According to Opendatabot data, out of 452,217 real estate purchase and sale agreements concluded last year, more than 60% relate to land transactions. This is 1.5 times more than transactions with apartments or houses: 273 thousand versus 178 thousand transactions. At the same time, according to
Land is growing in value from year to year
The land market is growing every month, as experts from the Kyiv School of Economics say. For example, in October last year, 13,000 transactions were made to buy and sell more than 25,200 hectares. This is a record since the beginning of the full-scale invasion. The average price per hectare in October was UAH 44,800. At the start, in early 2022, 1 hectare of farmland cost about UAH 30,000. According to various estimates, the cost of a hectare has increased by 18-24% since the land market opened.
As one of the heads of the investment company Zeminvest, Yevhen Nosalsky, notes in his comments
“The passive income of an investor from land lease ranges from 4-8%. We bought a land plot for UAH 400 thousand and leased it out at 7% per year, receiving an annual income of UAH 28 thousand. Investors also focus on capitalization – over the past year, land has increased in value by 18 to 24%. For example, they bought land for UAH 100 thousand, leased it out, and every year, in addition to passive income, it also increases in value. When selling, the investor remains in the black. And when the war is over, the growth in land value will be significant,” says Nosalsky.
Indeed, according to Opendatabot, today the highest cost per hectare of land is in Ivano-Frankivsk region – UAH 123 thousand, followed by Lviv and Ternopil regions, where a hectare is sold for UAH 102 thousand. However, experts advise paying attention to land plots in Vinnytsia, Cherkasy, Kirovohrad, and to the south of Zhytomyr and Kyiv regions, in fact, to the central part of the country. Although, for example, in Zaporizhzhia region, the cost of a hectare has reached UAH 88,154, and in Khmelnytsky region – UAH 77,111.
Land sales in the frontline and occupied territories have fallen over the past year. There are virtually no transactions in Sumy region, Chernihiv region is problematic, although activity remains in Dnipropetrovs’k region, closer to the central part of the country, and Kharkiv region, in areas far from the border with Russia.
Fewer risks
On the one hand, when investing in land, the risks are minimal, the investor receives the property rights immediately, there is no need to wait for years, the risks from shelling are minimal, the territory is cleared of mines and you can work, but if a shell hits a building, a house, the investment is lost. Buying land is now the way to go for those who are not going to or cannot withdraw money abroad, says investment banker Eric Naiman in his comments
“Land today is a dollar asset. The average rental yield is at least 5-6% per annum. But the main thing is the growth of land prices. But here you need to buy with professionals. You can buy a land plot yourself, but it will be overpriced, and you may not earn anything on the increase in value. This is a very professional market, and it is easier to buy an apartment than land,” the investment banker believes.
And the biggest risk for investors, according to Eric Naiman, is the occupation of the territory and the lack of rent, because the farmer may go bankrupt, and then the land will be idle for years. Therefore, he advises to buy land through a management company that will select, check, and fully conduct the transaction and take the land under management with a guarantee that the rent will be paid on time, and in case of force majeure with the lease, the investor will be paid all passive income in the form of rent from the reserve fund. For example, if the land plot is in the occupied territory. It will not be possible to sell it, but at least the passive income will remain. And there are already such cases.
And in the coming years, according to the Ministry of Agrarian Policy, the price per hectare is expected to rise by another 20%, as the land market is gradually gaining commercial attractiveness, and since January 1, 2024, the land market has also opened up to legal entities, which has significantly increased demand. While in 2021, 74,392 land plots (178,344 hectares) changed hands, in 2024, 193,560 plots, or almost 400,000 hectares, were alienated. This suggests that the market is developing.
Author: Alla Dunina
