The average asking prices for land at the upper end of the Lagos real estate market have skyrocketed, notwithstanding the swings in the Nigerian economy, with all macroeconomic indices exceeding analysts’ expectations and projections.
In that class of neighbourhoods, Banana Island, Nigeria‘s most expensive neighbourhood to date, is at the head of the pack where land value has risen dramatically in spite of the country’s weak economy.
In the last three years, the price of land in Banana Island has moved from N600,000 per square metre pre-Covid-19 to about N1.3 million, representing a little above 100 percent increase.
Udo Okonjo, CEO, of Fine and Country West Africa, noted that the price increase was indifferent to the negative impact of Covid-19 pandemic of 2020 – 2021.
“The interesting thing is that we saw a dramatic demand for land all across Ikoyi, especially Banana Island, during the pandemic, starting from around April 2020 to the dizzying heights the prices have taken by mid-2022,” Okonjo said.
Besides infrastructure, which is top-notch on this Island, inflation and naira devaluation, which has given those with hard currencies buying advantage, have been fingered as the main drivers of the price increase. Okonjo added that buyer psychology and profile are also major drivers.
She noted that Banana Island was not an isolated case as other locations also saw price increases within the period under review. Within old Ikoyi and environs, she said, land prices went from between N380,000 per square metre and N450,000 per square metre to a post-Covid 2022 average pricing of approximately N800,000 per square metre—N950,000 per square metre for the higher density roads, representing over 100 percent increase.
“Lekki Phase 1 is not too far off in appreciation, because traditionally as ‘a not-so-distant cousin’ to Ikoyi as an upmarket location, it benefits from the growth across the bridge,” she said.
With average prices now at N350,000/sqm and N400,000/sqm from pre-Covid prices in 2020 of about N200,000/sqm, buyers are definitely feeling the pressure here, especially as most mid-size developers scramble to acquire plots for new mini-size/cluster estates mid-size homes projects.
Another location where land price has gone up is Lekki Phase 1 which, according to Okonjo, is traditionally, a not-so-distant cousin’ to Ikoyi as an upmarket location as “it benefits from the growth across the bridge.”
“With average prices now at between N350,000 per square metre and N400,000 per square metre from pre-Covid prices of about N200,000 per square metre, buyers are definitely feeling the pressure here, especially as most mid-size developers scramble to acquire plots for new mini-size/cluster estates mid-size homes projects,” she pointed out.
Okonjo explained that investors were putting money in real estate for reasons that included the need to diversify from the dwindling stock market and to protect their local currency reserves as a hedge against high inflation rates by securing appreciating assets with limited supply.
Another reason, she added, was the increasing cost of creating new asset classes including investments in new businesses, or the difficulty in executing expansion plans along with the constraints and uncertainty around sourcing foreign exchange as an alternative hedge against devaluation.
“This means that most investors have begun exploring longer-term residential and commercial real estate developments, typically on a joint venture basis with experienced contractors/developers for the much bigger projects, by locking down these plots of land,” she noted.
Outside the island, land prices are also going up in other locations on the mainland, including far-flung locations like Ibeju-Lekki and Epe where price increases are driven by new developments in those areas.
In Ibeju Lekki, for instance, developers are acquiring land in response to developments such as Dangote Refinery, Lekki Deep Seaport, etc. This is to enable them to provide residences for the projected populace to come.
A recent report by Estate Intel lists some of these projects that draw investors to these locations as the over 2,000-hectare Alaro City mixed-use project by Rendeavour located in the Lekki Free Trade Zone area, the over 305 acres Isimi Lagos project by LandWey Investments Limited.
The report shows that land prices in Epe are currently selling at an average of NGN 10,156.34/sqm and are usually sold in various sizes ranging from 150sqm, 300sqm, 450sqm to 600sqm.
Prices in the region were around N900/sqm in 2017, with a 5-year growth average of 103.38%. According to Deborah Jesusegun, senior researcher at Estate Intel, this increase is the result of recent infrastructure improvements as well as increased demand for the neighbourhood.