Instead of providing a direct yes or no answer, I will present the available statistics on the profitability of investing in land in Ghana. Then, you form your judgement. A realistic response to whether speculative land purchase in Ghana is profitable is “it depends.” Buying a plot and reselling is profitable with a very big but. Read to find out more.
Expected returns on land sales
Long term data would have been the best to reveal the historical returns on land investments. Such data is not publicly available. Meqasa provides a good snapshot, albeit for only the Greater Accra Metropolitan Area (table 1). On average, land prices appreciated by 22.7% in Accra between 2018 and 2019.
Notably, North Ridge, Roman Ridge, Cantonments, Labone, East Legon and Airport Hills are Ghana’s prime real estate submarkets with very high land values. While land values increased by an average of 19.3%, an outlier was Airport Hills, where values tripled relative to the mean of other prime submarkets. It is unclear exactly why land prices rose astronomically there in a year.
At this writing, five advertisements were listed on Meqasa located at Airport Hills. Prices ranged from a low of GH$350,000 to GH$882,000 per plot. The average listed price per plot was GH$661,036.60. These prices suggest that current listed land prices have not significantly increased relative to 2018. Obviously, past performance does not always guarantee future price performance.
Average prices of land in Accra
Table 1: Average prices of a plot of land at selected locations in Accra
2018 | 2019 | Percentage Increase | |
North Ridge | 3,949,652.00 | 4,400,385.00 | 11.4% |
Roman Ridge | 2,211,869.00 | 2,833,958.00 | 28.1% |
Cantonments | 2,371,126.00 | 2,787,653.00 | 17.6% |
Labone | 1,940,625.00 | 2,403,350.00 | 23.8% |
East Legon | 675,390.00 | 781,481.00 | 15.7% |
Airport Hills | 634,906.00 | 1,041,607.00 | 64.1% |
Spintex | 590,000.00 | 752,800.00 | 27.6% |
Oyarifa | 75,400.00 | 83,000.00 | 10.1% |
East Legon Hills | 110,742.00 | 133,168.00 | 20.3% |
Aburi | 62,800.00 | 68,000.00 | 8.3% |
Source: Meqasa (2020)
Oyarifa, Aburi and East Legon Hills are located in peri-urban Accra and rapidly developing.
Is buying land a good investment?
To judge if buying land is a good investment, let’s compare land value increases with the treasury bill rates of the Government of Ghana, the safest investment option in the country (also known as risk-free rate).
From table 1, all the percentage land price increases of all localities (except Aburi and Oyarifa) exceeded the 364-Day Treasury Bill Interest rate of 15% in 2019. That implies buying a plot at East Legon Hills could have yielded a nominal profit of 22,426 Ghana Cedis. Investing that same amount (110,742 Ghana Cedis) in treasury bills would have generated an upside of 16,611.30 Ghana Cedis.
Even for Aburi and Oyarifa, some people certainly made upsides exceeding the treasury bill rates. The challenge is comprehensive data to track land price trends.
I bought some plots of land in Wa in the Upper West Region at 3,500 cedis in 2019. Plots of land currently sell for between 6,500 to 7,500 cedis within the same area. That would be an upside potential of 86%-114% if I were to sell today.
Contact me if you require more thorough analysis.
Your ultimate guide to buying land in Ghana
Ehwi (2020) provides data on land prices over a longer time horizon below. The annual percentage growth in value for all suburbs suggest that speculative land purchase is lucrative. Even for East Legon where the annual price growth was 21.25%, it exceeds the average 365-day treasury bill rate of 16.5% for the same period.
Average prices of land 2007 and 2017 for selected locations in Accra
Based on the above nominal figures, buying vacant land in Ghana is arguably profitable.
Also, there are currently no land holding costs. This situation means if one held a vacant land for several years, there aren’t taxes to be paid (at least not yet). But there have been discussions to introduce land holding taxes to reduce speculative land acquisitions. Additionally, some land developers and landowners expect you to build within two years of purchasing a plot from them.
A crucial question is whether the expected returns on land investments justify the risks in the land market. This decision must be a personal one. If one can minimise the risks involved in acquiring land, it may be a good investment alternative. Otherwise, stay away far from land. The risks premiums are very high. To give you an idea, the risks in the land market are so high that banks reluctantly accept titled landed property as collateral (Domeher et al., 2016).
One also needs to factor in inflation which in 2019 was about 9%.
I would, however, not make investment decisions based on such limited data. Long term data is required to understand how Ghana’s land market behaves and to predict future behaviour. If you have such data, kindly share it with me. The possibility that speculative land purchases in Ghana and particularly Accra can be profitable is not a solicitation or reason to jump into the Ghanaian land market.
Many have been burned buying parcels of land, including me. You can lose your plot even if registered. What is probably not highlighted enough is that buying a plot of land in any part of the country is a hazardous venture and litigation prone.
How to improve the value or selling price of your plot(s) of land
1. Register the plots and obtain a title or deeds of registration
The Lands Commission registers and issues deeds or title certificates for land. As expected, registered plots attract a premium price over unregistered prices. The reason is, among others, the relative certainty of ownership. Multiple sales of the same parcel to other persons and litigation are prevalent in Ghana’s land market.
- Fence the plots or some introduce other physical markers
Fenced plots are secured from encroachment. They also show your physical presence on-site and reduce other charlatanic behaviour towards your properties.
- Service the plots
This strategy may not be for everyone, but serviced plots (with paved roads, access to water) enjoy significantly higher prices.
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Land attracts its best and optimum use at a given time and, along with its best use, its best price. Thanks for the empirical evidence of the incremental value of the land. The inability of local authorities to control developments makes it an open day for speculative land buying at zero incremental cost to the speculator. When the lands act, land use act, and the local governance act become effective, it will be interesting to see how the profit margins will respond.
I absolutely agree with you.