Ukraine Market Report — Q2 2021
The agricultural land market opened on 1 July after two decades of prohibition. The first phase was deliberately narrow, and the point was to establish that transactions could happen at all.
Overview
The market in agricultural land opened on 1 July, restricted in its first phase to Ukrainian individuals with a holding limit, and with legal entities to be admitted at a later stage.
Commodity prices continued rising, supporting export earnings and pushing inflation higher.
The design of the first phase
The restrictions were criticised as excessive by those who wanted a full market and as insufficient by those who wanted none. Both criticisms miss what a first phase is for.
The purpose of a narrow opening is to establish the machinery: that the registry works, that transactions complete, that valuations can be obtained, that notaries and banks know the procedure, and that disputes have a resolution path.
A land market cannot be tested in theory. Opening it narrowly allows the mechanics to be found and fixed before volumes are large enough for errors to be expensive.
The commercial questions that mattered in the first months were procedural: how long a transaction took, what a valuation cost, whether registry records were complete, and whether banks would accept the land as collateral. Those answers determine whether the market functions, and none of them could be known before it opened.
The financing question
Bank lending against agricultural land developed slowly. Lenders needed valuation history, foreclosure precedent and a liquid resale market before they could underwrite against it — and none of those exist in the first year of a market.
That is not a design failure. It is the ordinary sequence: title first, transactions second, valuation history third, and lending last. The collateral value of Ukrainian farmland was always going to arrive years after the market opened.
Macro position
Growth continuing. Inflation rising. Currency stable. Terms of trade favourable.
Sectors
Agriculture — strong prices, a very large harvest in prospect, and a land market in its first weeks.
Metals — excellent conditions.
IT services — growing.
Energy — global gas prices beginning to rise sharply.
What the quarter settled
That a prohibition maintained for twenty years ended without disorder, and that the market's economic value would accumulate over years rather than appear at the opening.
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