Nigeria’s most expensive neighbourhood, Banana Island leads the pack of neighbourhoods in that class where land value has defied the poor state of the economy and has risen by 100% in 3 years.
The instability and uncertainty in Nigeria have had its toll on every sector of the economy with the real estate sector not left out with the rise in the price of land and building materials.
Even though all the macro-economic indicators beat the expectations and predictions of analysts, there has been an unprecedented rise in the prices for land across the upper end of the Lagos real estate market, especially the famous Banana Island.
Between 2020 and early 2022, 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 per cent increase.
Speaking on this development, Udo Okonjo, CEO, of Fine and Country West Africa, noted that the price increase was indifferent to the negative impact of the 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,” she said.
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She further stated that 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 adding that buyer psychology and profile are also major drivers.
“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 per cent increase.”
Another location where land price has gone up is Lekki Phase 1 which, according to Okonjo, is traditional, 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 said.
Okonjo further 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.
She stated that another reason 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.
