By Daniel Kontie – Founder and CEO, Africa Continental Engineering & Construction Network Ltd (ACECN)
Having worked as a built environment and real estate professional gathering data and attending industry conferences, summits, workshops et cetera, I have had access to several platforms where issues that bother on the built environment were discussed, key among which were the housing and infrastructure crises we face as a country. Quite interesting however, the recommendations many stakeholders gave as proposed solutions to the housing and infrastructure crises were always same and predictable. It has always been about the need for government to give tax incentives to importers of building materials so that prices could drop to ease the cost of housing and infrastructure development whilst others proposed the use of local building materials etc. But it does appear that, no one is interested in discussing the land price bubble, a significant variable in the equation that we all watched unconcerned over the years to deteriorated from bad to worst and from worst to desperate, almost becoming an issue of national security threat in recent times.
Having thought through the gravity of the disruption this may cause, I decided to put the subject up for discussion in October, 2024 on one of the industry platforms. The concern was the arbitrary and uncontrollable land price hikes occasioned by speculative perceptions at the expense of substance pushing the prices of land, housing and general infrastructure out of reach of the masses particularly, the ordinary Ghanaian citizen.
Several arguments came up but, in the end, the inferences that one could draw from a summary of the whole debate points to one conclusion that, there was nothing the government or anyone could do about it and that the situation will persist and may continue ad infinitum. But some of us have always thought differently, contrary to the popular opinion that this market failure cannot be corrected. But before we go into the substance of this subject today, it is important for me to let you appreciate the gravity of this problem at hand using Tema Community 25 (a township in Ghana, West Africa) enclave as a practical case study.
In 2019, the price of a titled land 70 ft x 100 ft sells at an average price of Ghs 10,000 (Ghana Cedis). Fast forward in 2020, it sold at an average price of Ghs 22,000. In 2021, same piece of land sold at an average price of Ghs 50,000 and in 2022, it went up to an average price of Ghs 110,000, and reaching unprecedented levels of Ghs 230,000 in 2023 and in 2024 same sold at an average price of Ghs 470,000 or more.
Estimating the monetary and percentage change in prices between the year 2019 and 2024, you will realize that the change in price between 2019 and 2020 is Ghs 12,000 representing a 120% increase in price. Then, that between 2021 and 2022 was Ghs 70,000 representing an increase in price of about 140%, whilst 2023 and 2024 recorded a change in price of Ghs 120,000 representing a 105% rise in price.
As it is clearly seen in the above analogy, there is a consistent over 100 percentage increase in the year-on-year prices from 2019 to 2024, meanwhile, one cannot really point to any significant change in any variable accounting for these skyrocketing prices, inner road networks still remains deplorable, high dust intensity around the enclave, both public and private amenities still the same, the old age heavy traffic situation on the stretch still remains unprecedentedly high etc. Isn’t this weird and interesting, anyway the future will depend on us, whether we take action now or ignore, the consequences, good or bad will live with us.
Now, having identified and defined the problem let me bring you back to the average income statistics of the Ghanaian. According to salaries Ghana (2024) and Worldometer (2024), the lowest Ghanaian average take home income per month is Ghs 1,280; the average median take home income is Ghs 4,340 per month whilst the highest average take home income is Ghs 22,600 per month.
Using the highest income earners as a case study even though the lowest and median income earners form the largest part of the Ghanaian population, let me predicate the analysis on the assumption that, the average highest income earner does not have any other source of income saves his job and is able to save 50% of this income (though not practical), with the intention to acquire a piece of land 70ft x1 00ft in Tema Community 25. By inferential analysis, it will take this person in question approximately 42years from 2025 to be able to raise Ghs 470,000 which is the current average land price in 2025.
What this means is that, the 42nd year from now would be 2067at which time the land price would have increased approximately 100% by forty-two (42) times, holding other variables constant, far out of reach of the average Ghanaian, taking reference from the land price incremental analysis in paragraph 4 of this article. With this analysis, it is obvious that, the lowest and median income earners do not even come into the picture.
Taking inspiration from the above, we also decided to do a cost build-up in last quarter of 2024 out of curiosity to compare the cost of building a simple 2bedroom house to the price of a raw land in same Tema Community 25 using some selected local building materials. The cost comparative analysis was based on the assumption that one is able to build this 2bedroom house in a space of 90days. The 90days assumption was to mitigate the possibility of general price rise of building materials that may be significant enough to blow the estimate out of proportion. But to our surprise, we realized that the Ghs 470,000 could build a 2bedroom house with a little balance to take home. Today, we have reached a point where the prices of raw land even in developing areas within the capital city of Accra can build a complete house even though these areas do not have social amenities to warrant the values being placed on these lands.
The consequences of the above problem are daring and this is our motivation to provoke a national conversation and to inform national policy on the urgency to tackle this problem head-on as we offer recommendations to reversing the trend.
Effects of Land prices Hikes on Cost of Housing and Infrastructure
The effects of land price hikes are telling on national development and security and will soon lead to serious national security crises if not addressed immediately. To the extent that a civilian will walk armed to a Police Station and allegedly gunned down a military officer in uniform at the full glare of the Police over land dispute (May 1, 2024, Kasoa Police Station) should be wake-up call on leadership.
Some critical factors to consider for this important discussion include:
Land Grabbing
To begin with, speculative land pricing leads to land grabbing, most often through questionable or coerced means with the intention to resell to maximize returns on investment. This can cause mass displacement of communities, loss of livelihoods of the local people, environmental degradation, land conflicts and violence etc. The current land guard atrocities which is a national security threat is as a result of the speculative and uncontrollable land pricing we allowed to persist over the years. Apart from this, land owners have to employ land guards to protect the hoarded lands for as long as they would want to hold it and the cost of engaging, equipping and maintaining the land guards are all added to the selling price of the land making the price preposterously high at the time that these hoarders are willing to resell.
Dysfunctional Market Mechanisms
Another consequential effect of land price hikes is dysfunctional market mechanisms: A speculative land price hikes encourages rapid and unbalanced urban development. In most cases, the speculative investors acquire huge parcels of land without intention to develop but to hold it for future resale in order to maximize profits. This drives up land values artificially, disrupting the creation of social housing and further widening the perennial housing deficit. So as land prices surge, developers face higher costs for acquiring land, which are then passed down to developers and homebuyers. The result is a precipitous increase in cost of housing and a general infrastructure. This becomes a big challenge for the low to middle income class of society leading to social housing crisis as many are helplessly been priced out of the market, while renters face skyrocketing rental rates as property owners only focus on recouping their investment. This is exactly the case we face today in Ghana, many low-to-middle income earners moving into slam communities, many commercial spaces vacant, with majority of small and medium scale businesses operating in fabricated steel containers placed on the shoulders of our roads everywhere because general rents are extremely prohibitive.
Inflationary Pressures on Construction Costs
In addition, land price hikes also have a direct impact on infrastructure projects. When the cost of land increases, it becomes more expensive for both government and developers to acquire for essential infrastructure development such as roads, schools, hospitals, sports and recreational facilities. This eventually impacts the selling, utility or rental prices of these infrastructure, thus further contributing to inequality, cost of living whilst hampering inclusive social and economic development.
Watch out for the continuation of this important discussion here on our website www.globalafricantimes.com .
The Author, Daniel Kontie is a Ghanaian Entrepreneur and a Business Executive. He is the founder and CEO of the Africa Continental Engineering & Construction Network Ltd (ACECN), a leading Pan African Engineering and Construction Company in Ghana and Africa, Falcon 48 Developers and other affiliated companies. He developed ACEACRES, a Pan African Built Environment Summit aimed at Integrating the African Built Environment for Socio-economic Transformation of the Continent. Daniel received recognitions for his contributions to the engineering and construction industry in Ghana and Africa. His work and achievements demonstrate his commitment to innovation, sustainability and built environment integration. Daniel holds three (3) degrees, B.Sc. Economics, Catholic University, Bachelor of Laws (LLB), Central University and MBA in International Business, Nexford University. Tel: +233209032280 Email: d.kontie@acecnltd.com. Website: https://acecnltd.com/ .
