Vladimir Nagorny: With Moratorium Lifted, Ukrainians Will Refrain From Selling Land Shares

Vladimir Nagorny, Head of the Land Policy and Property Relations Department at MHP
Vladimir Nagorny, Head of the Land Policy and Property Relations Department at MHP

The Head of the Land Policy and Property Relations Department at MHP Vladimir Nagorny considers that Ukrainians will not head into selling their land shares after the moratorium on farmland sale is lifted and he explains why.

Will Ukrainians sell land?

To be honest, I think they won't. At least, I personally have such expectations. Not without exceptions, of course. Some will still sell their land shares, but it will not be in the volumes (10-25% of all land) expected two or three years ago. Let's try to find out if the owners of shares will be willing to sell them.

Related: Factors That Form Farmland Prices in Ukraine

Farmland in Ukraine

Whom does the land belong to?

The vast majority — 70-75% — are rural residents. Their average age is 55-65. The rest 25-30% are mainly people of 45-55 who do not live in the area of the land share (urban residents, people working abroad, etc.). Accordingly, the main group, whose decisions will affect the quantitative indicators of land sales transactions, consists of mature and elderly local residents. Officially, the retirement age in Ukraine is 60. In reality, a small part of rural residents has sufficient working capacity at this age.

General information on land in Ukraine (click for full resolution)

These people need income to meet their vital needs. The average salary, according to the State Statistics Service, is close to UAH 9750. It is obvious that in rural areas it is much lower (approximately, twice as low) or there is no possibility to earn at all. At the same time, the income of a rural resident is often not a salary, but pension and land share lease payments.

According to the Pension Fund of Ukraine, as of January 1, 2020, the average pension payment was 3082.98 UAH/month. Of course, when one talks to rural pensioners who worked in agriculture, rarely does he hear that they receive such amounts. Most of them receive a close to the minimum pension, which is currently 1712 UAH/month or 20.5 thou. UAH/year.

Rural resident in Ukraine

In developed agricultural regions, the amount of rent after-tax for personal income is UAH 3.5-4 thou. per hectare or UAH 8-9 thou. per land share. Just think about it: the average villager receives 45% of his annual income from a leased land share. I think this needs no explanation that 45% of annual income is of great importance for a person with a low level of work ability living at the edge of poverty.

It is the importance of land in the life of an average owner that will be the factor why Ukrainians will not sell their land shares, as the owners are largely financially dependent on this property.

Surely, it is undeniable that some owners have a desire to sell their land. But I will still undertake to project that in the first period after the lifting of the moratorium (2H of 2021 and 2022) the decision to sell will be made by no more than 3% of the owners. This will barely have a tangible impact on land use relations in Ukraine.

Vladimir Nagorny, Head of the Land Policy and Property Relations Department at MHP

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