In the conditions of martial law and economic challenges, Ukraine is looking for new ways to fill the state budget and preserve assets that have lost their value over the years or remained without proper care. One of these steps is putting state property up for privatization auctions with a starting price of 1 hryvnia. At first glance, this decision may be surprising. Isn’t this an attempt to sell state property for nothing? Why do buildings, garages or other objects that should bring profit start their new journey with symbolic value?
These questions were answered thanks to the results of the first successful auctions. Your assessment of this phenomenon and detailed analysis of the situation provided Deputy Chairman of the State Property Fund of Ukraine (FSMU) Ihor Tymoshenko.
Why is the starting price 1 hryvnia?
Ihor Tymoshenko considers the implementation of auctions with a starting price of 1 hryvnia as an effective tool for the sale of state assets. In his opinion, these auctions have several key advantages that have made them successful even in difficult economic conditions.
According to the expert, the low starting price is due to the requirements of the current legislation. It is set at the level of the book value of the asset, which, in cases where such information is absent or equal to zero, is fixed as the minimum – 1 hryvnia. This decision was made possible by regulatory changes that allow individual property (for example, buildings, transport) to be listed at this price, but do not apply to property complexes of state-owned enterprises.
Tymoshenko emphasizes that the war made adjustments to the real estate valuation procedure. It is impossible to carry out a full-fledged assessment now, because it is contrary to the legislation aimed at maintaining economic stability during the war. Therefore, the state faced two options: to leave the assets in decline until the end of the war or to transfer them to private ownership through auctions. The second option turned out to be effective and profitable.
The success of the first auctions
Tymoshenko cites statistics that testify to the success of the innovation. As of mid-November 2024, 10 auctions were completed with a total amount of signed contracts of almost 5.3 million hryvnias. The most expensive lot was an administrative building in Pustomyty, Lviv region, which was sold for over 1 million hryvnias. Other examples: garages in Khust and Olevsk were valued at almost 900,000. hryvnias each, and the object in Perechina found a new owner for 570,000 hryvnias. UAH
Despite the starting price, even less popular objects have achieved significant value as a result of competitive bidding. For example, the cheapest lot was a building in the town of Lubar, Zhytomyr Region — after the first unsuccessful attempt, it was sold for 44,400. UAH
Ihor Tymoshenko emphasizes high competition among bidders. On average, each auction collected about 10 offers. The most striking example was the garage in Kropyvnytskyi, where 24 participants competed, raising the price to 365,000. UAH This confirms that the real value of the asset is formed thanks to open competition.
How does it work and why is it beneficial?
The expert explains that the low barrier to entry makes these auctions attractive for businesses. A minimum guarantee fee and a symbolic starting price allow even small entrepreneurs to join the auction and test their strength. This stimulates demand, and hence asset price growth.
Auctioneers do not know how many competitors will compete for the object, which contributes to the formation of a fair price. As a result, even lots with zero book value can bring the state hundreds of thousands of hryvnias.
According to Tymoshenko, everyone benefits from this approach. The state gets rid of assets that are no longer used, receiving significant funds for the budget. New owners, in turn, breathe new life into these objects, using them for business or other purposes. Thus, instead of decay and losses, these assets become a source of profit.
The State Property Fund plans to auction about 400 more similar objects. According to Tymoshenko, the first successful auctions proved that there is a demand for such assets, and competition ensures their real market value. This not only fills the budget, but also contributes to economic growth even in difficult conditions of martial law.
“One of the reasons why a large number of market players come to compete for these lots is the low entry threshold. That is, you can start with small bets, compare your opportunities with competitors and, in the process, decide whether there is a financial opportunity and a need to go all the way. At the same time the guarantee fee and the minimum step in these auctions are “pennies” in the literal sense of the word.
At the same time, there is no need to worry about the fact that someone will receive state assets for nothing. Before the start of the auction, participants have no information about the availability and number of competitors. So if the object is really interesting for them, they will set a fair price for it themselves. Auctions in which participants increased the value of lots to hundreds of thousands or even more than a million hryvnias are proof of that.
The results of the sale of privatization objects with a starting price of 1 hryvnia prove that this approach fully justifies itself. Government assets with zero or no documented book value begin their second lives with new owners. Instead of losses, the state budget is replenished with millions of hryvnias, which contribute to the support of our Defense Forces.” – summarizes Tymoshenko.
