CONTROLLING THE SPECULATIVE LAND PRICE INFLATION IN GHANA: A PREREQUISITE TO A SUSTAINED HOUSING AND INFRASTRUCTURE PRICE STABILITY

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 enclave as a practical case study.

In 2019, the price of a titled land 70ftx100ft sells at an average price of Ghs 10,000. 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 realized 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 70ftx100ft 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 realised 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 is 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 gun 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.

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 maximise 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 maximise 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.

Suboptimal Land Utilization

Moreover, land price hikes can also drive a misallocation of resources, with profit oriented developers seeking high-return projects rather than efficient land use for public infrastructure. Instead of focusing on building affordable housing, efficient transportation, or critical utilities, investment may be channelled toward speculative projects with higher margins. This often leads to inefficiency in urban planning, undermining long-term sustainable development. This is the situation we have reached in Ghana now where over 90% of the real estate investment is concentrated on high-end properties instead of distributing development uniformly across all sectors in the property economy.

Recommendations to Controlling Land Price Bubbles

As I write, I am just thinking about how weird it may sound to people for me to propose the idea of controlling land prices. Some may wonder what might have been my motivation to think that land prices can be controlled in an enterprise economy. But the question is, has it been done elsewhere before, if yes, then it can be done in Ghana. The most effective measures typically involve a combination of regulatory, taxation, and urban planning reforms. Below are some best practices and their application in different jurisdictions duplicable in Ghana taking into cognizance the Ghanaian context.

Zoning and Land Use Regulations

Governments can control land prices by adjusting zoning laws and land use policies. Restricting land use in certain areas and expanding zoning for residential development can help distribute land supply more evenly across urban areas, reducing scarcity and curbing price surges. The question is, is this feasible, yes, it is. In 1970 Singapore regulated speculative land pricing using zoning and land use Regulations. Singapore’s highly regulated land use and zoning policies have successfully controlled speculative land price inflation. The Urban Redevelopment Authority (URA) sets out long-term land use plans subject to review in every five years, which has helped in maintaining land supply for both public and private housing till date.

Vacant Home and Land Tax

This will be a tax that a land owner or landlord has to pay for leaving his or her land undeveloped or in the case of a home or commercial space. This tax will mitigate if not eliminate the issue of land hoarding as people who hoard huge parcels may be compelled to release them to ease the heavy tax burden on them. Similarly, the property vacant tax will compel home or commercial property owners to charge moderate rents affordable enough to increase the abysmal occupancy rate we have currently in Accra in particular. Just in 2022, Canada implemented this policy in Vancouver, Toronto and some other cities to control the general property price level across the country, and it worked perfectly. Why are we saying it cannot work in Ghana, anyway this is a rhetorical question to all of us.

Public Land Banks

Additionally, the government by policy can engage in direct land acquisition for public housing projects, preventing inflationary pressures on land prices. By establishing public land banks, the state can acquire, manage, and sell or lease land. This will help stabilize land prices by controlling the flow of land into the market. The state can acquire underused or vacant lands and release it in a controlled manner to prevent speculative price hikes. The United States of America in various cities such as Cleveland, Detroit etc has implemented this policy to stabilize land markets in areas that were hit by economic decline. These land banks allow the local government to acquire and redevelop land, eventually selling it for the purpose of affordable housing or infrastructure development, this helps keep the land prices relatively stable. We still have huge parcels of uninhabited lands around the Tema-Aflao stretch, Apollonia City, Prampram, East Legon, East Legon Hills, Tema, Aburi, Pokuase etc. Government may consider if it so wish to consider our recommendations in this regard.

Speculative Land Holding Regulations

Also, Government can implement speculative land holding laws that will prevent excessive land hoarding and price manipulation. By this regulation, we can place a caveat on the number of parcels of land an individual or a corporate organization can acquire and for how long they can hold these lands undeveloped. This will put pressure on investors to acquire parcels they only develop hence eliminating the canker of land grabbing and hoarding we face as a country today. In furtherance of this, the law may consider placing restrictions on foreign land ownership, one of the major variables contributing to the land price inflation in Ghana. A classic case in this is New Zealand. In 2018, New Zealand introduced the “Foreign Buyer Ban” law restricting the ability of foreign buyers to purchase existing residential properties. The aim was to regulate price bubbles driven by foreign direct speculative investors. This policy has contributed to more stable land prices and greater affordability for local buyers in New Zealand today.

Conclusion

In conclusion, land price bubbles or hikes pose a significant challenge to housing and infrastructure affordability particularly in rapidly growing cities and urban centres. Through the implementation of international best practices and some home-grown policies, we are very optimistic that the situation can be reversed. While each country may have different challenges and unique contexts, the global trend toward stricter land price controls, responsible land use, planning, and land regulations offers important insights in mitigating the negative effects of land price bubbles. A careful and strategic approach to land management will be crucial in ensuring sustainable housing development and robust urban infrastructure in the years ahead. A detailed and comprehensive expert’s report will be made available to any interested person by the Africa Continental Engineering & Construction Network Ltd if they are willing to pay for this consultancy service.