Land Prices Move Up 42% in Prime Locations as Cement Prices Stay Up

By Adaobi Rhema Oguejiofor

As opposed to the declining situation in the building and construction sector, where many projects sites have been reportedly abandoned as a result of the surge in the prices of building materials, the land market seems to remain highly active and thriving. Inflation, Naira devaluation and the sustained demand for land has been credited for this situation.

Latest figures from the National Bureau of Statistics (NBS) disclosed that the headline inflation rate in Nigeria increased from the January 2024 rate from 29.90 percent to 31.70 per cent in February 2024, which in turn pushed up prices across various sectors and, along with the Naira devaluation, significantly reduced the value of money in individual and household wallets, thereby also increasing the prices of landed properties across the country.

Over the period of six months, which comprises October 2023 to March 2024, the price of land in prime locations in states like Lagos is believed to have witnessed an average of 42 per cent increase, which offered investors good return on investment (RoI) at a time when other assets classes struggle to survive in an unsettled economy.

According to experts in the industry, the increase in price of land is mostly in prime locations, particularly in Lagos, Nigeria’s home of luxury real estate, which implies that the story is not entirely the same in other market nodes, especially markets for low income buyers. For instance, in Banana Island, the most exclusive highbrow location in Nigeria, the cost of land rose from N1.4 million per square meter in October 2023 to between N2 million and N2.2 million per square meter in March 2024. While in Old Ikoyi, which is another highbrow location in Lagos, land price in October 2023 was between N800, 000 and N900, 000 per square meter, but rose to between N1.3 million and N1.4 million per square meter in March 2024.

For areas like Victoria Island which, compared to Banana Island and Ikoyi, is more of a commercial than residential market node, land value mounted up to N1.2 million per square meter in March 2024 from N900, 000 per square meter in October 2023.

A Senior Partner at Ubosi Eleh and Co, a real estate firm, Mr. Emeka Eleh, confirmed the price movement and attributed it to high inflationary trend in the economy, which made real estate, especially land, the preferred destination for people who intend to protect their funds against the notions in the economy.

Eleh, disclosed this while speaking as the keynote speaker at an International real estate conference and the 10th anniversary celebration of the Association of Real Estate Agents in Nigeria (AEAN), which was themed, ‘From Competition to Co-operation: Navigating Partnership in a Dynamic Real Estate Market.’

While speaking, 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, as well. Lekki recorded close to 100 per cent price increase from N450,000 per square meter in October 2023 to between N800,000 and 850,000 in March 2024, while Ikeja GRA, was at a marginal price increase from N550,000– N600,000 per square meter but has now increased to N800,000 – N850,000 per square meter.

In his words, “investing in land is always a good investment decision and when there is a downturn in the economy such as we have now with high inflationary trend, land is the way to go to hedge your fund against inflation and unless land becomes degraded, it hardly depreciates in value.”

Meanwhile, cement prices continue to defy manufacturers-government agreement and presidential directives to the producers to bring down their price. Experts and real estate operators have brought up suggestions that could drag down the price from the elevated position it is currently in to an affordable level.

Reports reveal that, against the manufacturers and government’s agreed price of N7,000 to N,8000 per 50kg bag, major brands like Dangote, BUA, Lafarge and Ibeto still sell at an average price of N11,000 per bag. This is despite the threat by the federal government that it might open up the borders to allow imports of cement. Experts and investors in the real estate sector highlighted that this price rate is unsustainable, unrealistic and an anti-investment, thus, affecting everybody connected to real estate including developers, property owners and end users who are now paying more than the contract prices.

Among the experts in the industry, the immediate past President of the International Real Estate Federation (FIABCI)-Nigeria, Adeniji Adele, noted that it is monopoly that is driving up the price of the commodity. To him, until the monopoly is broken, Nigeria and Nigerians will continue to be at the mercy of these few manufacturers.

Adele added that, the way to go about it is to liberalize the cement market by giving license to more people to manufacture the product so as to increase supply to match the surging demand from commercial real estate developers, highways and bridge contractors and private home builders.

The Cement Producers Association of Nigeria (CPAN), on their part, called on President Bola Tinubu to end the monopoly in cement production and distribution, urging him to revisit the backward integration policy of past administrations so as to allow the sector to meet the available demand at affordable costs. The Association’s Chairman, David Iweta, said that the President, who is working with the Ministry of Industry, Trade and Investment and the Ministry of Finance, must dismantle monopoly and expand the scope for participation by those with verifiable local investment in cement and other industries.

Principal Partner at Ubosi Eleh, Mr. Emeka Eleh, noted that although he shares the view that the high price of cement is a huge challenge for the housing sector and other aspects of construction, he still believes that the manufacturers are simply adjusting the price to their cost of production. “Many companies have shut down and those that are still in business are struggling with soaring logistics and diesel costs plus double taxation,” Eleh noted.

He explained that logistics cost has increased since the removal of petrol subsidy, which has seen the price of petrol go up by over 200 percent from N165 per litre to N600—N700 per litre, adding that the manufacturers also contend with the poor state of the roads in the country.

Eleh lamented that cement manufacturers need diesel to power their generators, as well as to power the heavy machinery used for blasting the raw materials extracted from the quarries and currently the price of diesel have gone up from between N850 and N900 per liter in January 2024 to N1,700 per liter. He noted that energy is a major problem that needs to be addressed for prices to come down.

On his part, the founding Managing Partner and Deputy Chief Executive Officer (CEO) at Purple, Obinna Onunkwo, in agreement with Eleh, stressed that the government needs to do something, not just by price control but by addressing the obvious challenges which cement manufacturers face, such as the issue of inflation, volatile exchange rate, energy costs, among others.

Another expert, the CEO of Estate Links, Gbenga Olaniyan, who is soliciting for opening up the borders to allow imports for a short time, lamented the huge adverse impact of the high cement price on all stakeholders in the real estate value chain.

Olaniyan, who is an estate surveyor and valuer, as well as a property developer, stated that the impact is at different levels, affecting those who are about to start projects, those who have started and those who have not even started at all.

“We have seen some developers who have decided to hang on so that they can configure the project and find out its viability. Some have decided to sit back and consider the viability or market value of the project while those that have started have only two choices to make, which is either to hold on or to continue working,” he said.

On a brighter side, the quest to improve the Nigerian housing sector, has promoted the Federal Ministry of Housing and Urban Development (FMHUD) to unveil its plans to assign about  8,925 residences to deserving applicants nationwide through the national housing programme.

The information regarding this welcome development was contained in a statement by the Permanent Secretary of FMHUD,  Dr. Marcus Ogunbiyi in Abuja, where he stated that the allocation encompasses diverse housing schemes, encompassing outright payment, mortgage, rent-to-own and installment payment, all tailored to suit the multifaceted needs of applicants.

Ogunbiyi explained that the allocation marks the completion of a thoroughly detailed assessment of the prerequisites and protocols governing housing sales under the National Housing Program, as outlined in a circular disseminated in December 2023.

Applicants enrolled in the mortgage, rent-to-own and installment payment schemes have been mandated to be subscribers to the National Housing Fund and are currently undergoing profiling.

The Permanent Secretary noted that successful applicants for outright payment will be extended offers for new provisional allocations with Federal Controllers of Housing and Urban Development in states and the Chairman and Chief Executive Officer (CEO) of the Nigerians in Diaspora Commission (NIDCOM) initiating contact with subscribers beginning for further coordination.

He further clarified that completed houses are unavailable in Abia, Lagos, Bayelsa, Rivers states and the Federal Capital Territory (FCT), stating that the allocation of units in these regions will be conducted upon the culmination of housing projects later in the year.