The second stage of the land reform comes into effect on January 1

From the new year, legal entities will be allowed to buy agricultural land, and for individuals, the maximum plot size will be increased. Analysts of the "Ministry of Finance" analyzed how this would affect the price of land.

From July 1, 2021, the land market in Ukraine became operational, and owners of agricultural land were allowed to sell, and private investors - to buy plots. But for now, only natural persons can buy land, and then no more than 100 hectares.

From January 1, 2024, legal entities created and registered under the laws of Ukraine, whose participants are only citizens of Ukraine or the state or territorial communities, will be allowed to buy land. And the maximum size of the plot that can be purchased by one person (legal or physical) will grow to 10,000 hectares, which will still be much smaller than the land banks of large agricultural holdings. Thus, the land bank of the largest Ukrainian agricultural company, Kernel, is 510,000 hectares, and that of UkrLendFarming is 475,000 hectares.

The law envisages the third stage of opening the land market, when foreigners will be allowed to buy it. But it is not yet known when this will happen, because such a decision must be approved in an all-Ukrainian referendum, which cannot be held now.

In May, a draft law on the postponement of the second stage of land reform from 01.01.2024 to 2 years after the end of martial law was submitted to the Verkhovna Rada. "As a result of the war, agrarians suffered significant losses, so they will not be able to compete with large agribusinesses when buying land," the All-Ukrainian Agrarian Council believes. However, the chances of the bill's adoption are minimal, as it has not yet been considered by the committee.

According to D. Pasichnyk, the director of the Dobrozem company, which created a marketplace for land transactions, even despite the military operations in the country, there are several reasons not to postpone the changes:

• Western partners believe that the continuation of the land reform will have a positive effect on the economy;
• an increase in the number of transactions will increase the amount of taxes;
• an increase in the number of investors will increase competition, which will contribute to the development of the land market.

The company "Tvoye kolo", which helps investors buy land, believes that the second stage of land reform will allow legal entities to develop long-term projects, attract loans, develop infrastructure, build reclamation systems, processing, etc., which was inappropriate to do on leased land.

According to forecasts of the Kyiv School of Economics, within 3 years after the opening of the land market for legal entities, the country's GDP may grow by 1-3%.

According to the Ministry of Agrarian Policy, the price of land in hryvnia equivalent increased by 20% this year, but this figure does not reflect the real situation, as it takes into account the purchase by developers of plots for development or recreation near large cities. Agricultural land now costs $1,300-$2,800/hectare, depending on the soil, plot location, region, and other factors.

Experts believe that the opening of the land market for legal entities will significantly increase demand. Farmers are waiting for an opportunity to purchase land so as not to play with "gray" schemes. Entering the land market of brokers and agricultural investment funds will increase liquidity and simplify the purchase process. Agricultural holdings will start buying land, as a result of which the dollar price may rise by 20-25% next year.

But not all experts are confident in the increase in land prices, as they will be formed on a real economic basis. "Currently, the price of land is low due to significant logistics costs, and farmers are incurring large losses, so they will not be able to offer too high a price. Within 2 years, prices will rise by 20%, and after the victory, you can expect a significant increase in the price of land," analysts believe.

Currently, the number of land sellers is not very large, and since 01.07.2021, only 1% of agricultural plots have been sold. Owners of units expect prices to rise, or use them to generate rental income, and sell only in case of urgent need.

After opening the market for legal entities, it will be affected by a shortage of offers, an increase in demand and the difficult financial situation of agricultural producers.

The full review can be found at the link