Contrary to the dire situation in the building and construction sector where many projects sites have been reported abandoned due to surging building materials prices, the land market remains active.
This has been attributed to the galloping inflation, naira devaluation and sustained demand for land. Headline inflation rate in Nigeria, according to the latest figures from the National Bureau of Statistics (NBS), increased to 31.70 percent in February 2024 relative to the January rate which was 29.90 percent.
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This has pushed up prices across sectors and, together with the naira devaluation, reduced significantly the value of money in individual and households’ wallets. Land is not left out in the meteoric price rise.
In the last six months, spanning October 2023 to March 2024, land price in prime locations in Lagos is said to have seen an average of 42 percent rise, giving investors good return on investment (RoI) at a time when other assets classes are struggling to survive in a troubled economy.
Experts note, however, that the land price rise is mostly in the prime locations, especially in Lagos, Nigeria’s commercial nerve centre also known as the home of luxury real estate. This means that the story is not entirely the same in other market nodes, particularly markets for low income buyers.
In Banana Island, the most exclusive highbrow location in Nigeria which is home to the country’s crème- de-la-creme, land price rose from N1.4 million per square metre in October 2023 to between N2 million and N2.2 million per square metre in March 2024.
In Old Ikoyi, which is another highbrow location in Lagos, land price in October 2023 was between N800,000 and N900,000 per square metre, but rose to between N1.3 million and N1.4 million per square metre in March 2024.
As for Victoria Island which, unlike Banana Island and Ikoyi, is more of commercial than residential market node, land value climbed to N1.2 million per square metre in March 2024 from N900,000 per square metre in October 2023.
Emeka Eleh, a Senior Partner at Ubosi Eleh + Co, who confirmed this price movement, attributed it to high inflationary trend in the economy which made real estate, especially land, the preferred destination for people who wanted to hedge their funds against the vagaries in the economy.
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Eleh was, on Tuesday in Lagos, the keynote speaker at an international real estate conference and 10th anniversary celebration of Association of Real Estate Agents in Nigeria (AEAN) which had as theme, ‘From Competition to Co-operation: Navigating Partnership in a Dynamic Real Estate Market.’
He noted that other market nodes such as Lekki, which is said to be the fastest growing real estate corridor in Nigeria, Ikeja GRA, Ogudu GRA and Oniru also recorded significant price increases.
While Lekki recorded close to 100 percent price increase from N450,000 per square metre in October 2023 to between N800,000 and 850,000 in March 2024, Ikeja GRA, had a marginal price increase from N550,000 – N600,000 per square metre to N800,000 – N850,000 per square metre.
“Investing in land is always a good investment decision and when there is a downturn in economy such as we have now with high inflationary trend, land is the way to go to hedge your fund against inflation,” Eleh said, adding that unless land becomes degraded, it hardly depreciates in value.
The rise in land price comes as a sharp contrast to what happens in building and construction where Gbenga Olaniyan, CEO, Estate Links, told our reporter that the first quarter of this year witnessed developer-contractor conflicts that went for arbitration with some ending up in court.
“Inflation, naira devaluation, volatile exchange rate and high building materials cost combined to make developments unrealizable in terms of contract cost and developers commitment to home buyers,” he said, adding, “contracts are no longer enforceable while the increase in the cost of building materials has caused a lot of havoc for a lot of building contracts.”
Olaniyan stressed that developers were in a situation where quite a few deals that had been pre-signed but not delivered saw parties to the deals going back to the table to negotiate.
“We have cases where a contractor that had deposited money for cement at N5,000 went back to collect his cement and was told there was no cement for him because the price of cement has gone up to N10,000 and that is the market reality that made a lot developers renege on their promises to buyers,” he said.
