Hectares Priced Like Gold: Who Benefits from an Accelerated Rise in Land Prices

Despite forecasts of a sharp surge in Ukrainian land prices, this market has developed smoothly and steadily during the war, not delivering the millions promised to investors.

Still, promises of golden mountains in hectares continue to circulate on the market, write journalists at the UNIAN news agency.

When Ukraine opened the agricultural land market in 2021, society was promised a true economic revolution. Some predicted an immediate sharp rise in hectare prices, others — from 2024 onward, after legal entities were allowed to buy land. Comparisons with land prices in neighboring EU countries, notably Poland, were meant to convince Ukrainians that land would become a new “gold” for private investors and provide double-digit returns in foreign currency.

Five years have passed. Most of the loudest forecasts of a rapid increase in land value did not come true. Nevertheless, calls to buy land right now—while prices allegedly haven’t yet skyrocketed—are once again active in the information space.

But is the Ukrainian market truly entering a phase of a new price breakthrough? And most importantly — who benefits from accelerating this process?

Fundamental drivers of land price vs. market illusions

In the 2021–2022 years, few analyzed the Ukrainian land market in the context of global economic and geopolitical processes. In fact, the rise in Ukrainian land prices in 2021–2024 was largely a consequence of post-COVID inflation — the rapid increase in global prices after the COVID-19 pandemic, later compounded by russia’s full-scale war against Ukraine, and global energy and food crises. Rising prices for gas, oil, and grain reinforced investors’ perception of a long-term upward trend.

At the same time, Ukraine lacked fundamental factors capable of sustaining such growth. Unlike subsidized agriculture in the EU, the Ukrainian agricultural sector operates without large-scale budgetary support. Therefore, opening the land market could not replicate the Polish scenario, where, after EU accession, agricultural profitability surged and rural areas received a development impulse due to so-called “reverse urbanization” — people returning from cities to rural areas thanks to increased economic attractiveness of the agricultural sector.

It was the EU’s “direct hectare payments” — roughly 55 billion euros over 20 years — that turned Polish land into one of the country’s most profitable assets. Owners received guaranteed income even if they merely maintained the land in acceptable environmental condition. This tied land capitalization to the level of subsidies and produced nearly a twelvefold increase in its value.

The Ukrainian market does not have such fundamental drivers, and their emergence in the coming years is unlikely. Thus, direct comparisons between the Ukrainian market and EU countries are hardly correct, since they are based on fundamentally different models of agricultural economics and state support.

Ukrainian land as a “government bond”: an analogy that doesn’t work

Today, in the public mind, agricultural land is increasingly perceived as a kind of risk-free asset — analogous to U.S. Treasury bonds: buy, wait, and then sell at a guaranteed higher price.

However, this analogy is false. The value of U.S. government bonds is backed by the creditworthiness of the U.S. government, and the return of invested funds and payment of interest are guaranteed by the state.

Land has no comparable guarantor. Its price is determined solely by the balance of supply and demand, the profitability of agricultural production, access to credit, tax policy, war risks, and the overall investment climate.

If these factors worsen, the market can stagnate for years or even lose value.

Land price and rent: why they are not the same thing

Another common misconception is the belief that rising land prices automatically mean higher rental payments. In reality, there is no direct dependence between these indicators.

Land price reflects investors’ expectations about its future value, while rent is determined, among other things, by agricultural profitability, yields, world prices for agricultural products, production costs, competition for land banks, and the financial condition of agricultural enterprises.

If agribusiness profitability does not increase, producers have no economic reason to significantly raise rent, even if land itself becomes more expensive. Otherwise, rent begins to eat into the producer’s margin, making land cultivation economically unviable.

That is why counting on a constant increase in rental income is not an inherent property of the land asset, but a forecast that can materialize only if efficiency and profitability of the entire agricultural sector grow.

Ultimately, land does not generate profit by itself. Profit is generated by the agricultural producer working on that land. Therefore, the long-term value of land always depends on the economics of agricultural production, not on investor sentiment or market expectations.

War as an unexpected ally of the market

The full-scale war became a kind of cooling period for the land market. Under normal conditions, opening the market could have sparked speculative frenzy, massive inflows of investment capital, and a sharp rise in prices. Instead, the war forced agribusiness to focus on survival: maintaining production, restoring logistics, and ensuring liquidity. Under such conditions, buying up land banks moved to the back burner. And as long as the war continues, this situation is unlikely to change dramatically.

Beyond the cost of the land itself, large land banks require additional expenses for administration, legal support, and management, as well as qualified specialists, who are increasingly scarce due to the demographic crisis and labor shortages. All of this restrains demand for large-scale expansion of land banks even from big agricultural producers.

For the real sector this has an unexpectedly positive effect. Moderate price growth has allowed capital to be directed not to land acquisition but to business development — machinery, irrigation, elevators, logistics, and processing. After all, increasing the value of a land bank from 10 to 30 million dollars does not create new value for the enterprise, it only raises its need for capital.

That is why the market has had the opportunity to develop gradually, without sharp price jumps and overheating.

Forecasts that did not come true

The market’s moderate development took place contrary to the forecasts of many of its most active promoters.

The main expectations voiced in the 2022–2024 years can be reduced to a few theses.

The phenomenon of the Ukrainian land market is that its successful development happened not thanks to the predicted craze, but in spite of it.

The war, which should have paralyzed the market, in fact protected it from the threat of overheating. While investment platforms for years talked about rapid price increases and land shortages, the agricultural sector did much more prosaic things — survived, restored logistics, and calculated production costs.

That is why the main question today is not whether land will become more expensive. The main question is — who benefits from creating the illusion that it will?

Who is talking today about a new land boom

Despite results far more modest than forecast, by 2026 the rhetoric about the future land market again became extremely optimistic. Most often the thesis of a rapid rise in the price of Ukrainian chernozems was promoted by representatives of companies specializing in land investments. They shape a significant part of the public agenda at industry conferences, in business media, and on investment platforms.

For example, in June 2023, six months before the market opened to legal entities, Zeminvest’s deputy director Yevhen Nosalsky predicted: “By our estimates, literally in the first year in some regions there will be a rapid increase of about 50–75%, and it will not stop for several more years.”

In May 2026, another Zeminvest representative and co-founder, Oleksandr Chornyi, again said: “Land could increase in price by up to 80% in dollar terms over the next three years.”

Who’s who in the market of land optimism

It is important to emphasize: this is not about a lack of expertise. On the contrary, these people built market infrastructure, were the first to learn how to work with land deals, and did much for its development.

However, they are not only experts, but also market participants. Therefore they have their own economic interests.

Any investment platform profits from transactions. The more people buy land, the larger the volumes of commission income, assets under management, and related services. So there is a fundamental difference between an independent analyst and the head of a land platform.

The former assesses the market. The latter is also its seller. That is why any statements about future land value increases should be viewed not only as expert forecasts but also through the lens of their author’s business model.

And if investment manager Andriy Usenko claims: “Ukrainian agricultural land today is one of the most effective investment instruments on the domestic market, capable of providing returns at the level of 20%+ per year in dollars with professional management,” — land market expert Andriy Usenko cannot be unaware that the payback period for land in purchase deals by 2026 has already reached 15 years.

A new conflict: investor vs. producer

At the start of the land reform it was thought that investors’ and farmers’ interests would coincide. Today the situation looks different. The investor is interested in maximally increasing the asset’s price. The producer is interested in preserving access to land resources and controlled production costs.

For the investor, land price appreciation means profit. For the farmer — additional costs.

The more expensive land becomes, the higher the costs of buying up land banks and the greater the capital burden on agribusiness. At the same time, a high per-hectare price by itself does not add yield, build elevators, or solve logistics problems.

…The Ukrainian land market has proven its institutional resilience even under conditions of full-scale war. Despite unprecedented risks, it continued to function without sharp price distortions and speculative overheating. That is why the main challenge in the coming years is not accelerating price growth, but maintaining a balance between the interests of financial investors and agricultural producers. After all, the profitability of land investments directly depends on maintaining the stability of agricultural production.

Speculating with forecasts on the land market can create artificial frenzy that will seriously hit the profitability of agricultural producers. The first to suffer will be family farms, whose reserves of economic resilience are far lower than those of large agroholdings. If farming shrinks, hopes for land prices to reach Polish levels become illusory, because European Union subsidies are primarily designed to support farmers.

The history of recent years has shown: the loudest forecasts do not always come true. Therefore, questions about the market’s future should be posed not only through the prism of expected profitability. One should also ask the classic Roman question — Cui prodest? (Who benefits?). Each time we hear yet another forecast of an inevitable land boom, it is important to understand which business stands behind those words.

Source: UNIAN