Dealing with Speculative Prices in Sub-Saharan African Land Markets

Moses Mpogole Kusiluka and Sophia Marcian Kongela

ERES from European Real Estate Society (ERES)

Abstract: In the wake of rapid urbanisation and increasing demand for agricultural land, both urban and rural land markets in many African countries have attracted speculative practices. Many people are engaged in buying land aiming at reselling it profitably at some future dates. This is done hoping that land values will keep on appreciating, which is supported by historical trends. In many African countries land has been regarded to have no or little monetary value until recently when land is increasingly being put to commercial use. Speculative prices have sometimes inhibited land based investments. Using the cases of Tanzania, Kenya and Ethiopia, this study reviews institutional approaches employed in the selected countries to deal with land speculation. The three countries are among the rapidly urbanising countries in Africa which are also attracting large scale investment in agriculture. The aim of the study is to assess the effectiveness of land speculation control techniques in emerging African land markets.The study entailed obtaining and critically reviewing policies, laws and regulations used in the selected countries in dealing with land speculation. Interviews with key informants were used to collect and validate data obtained from literature. Analyses for the different countries were compared and contrasted to draw lessons for effective mechanisms of mitigating land speculation. The study also involved comparing the practice in the selected countries against the international best practice.Results show more similarities than differences for the three countries in terms of ineffectiveness in dealing with land speculation and the resulting negative impacts. All countries have weak institutional environments governing land market operations. It was alarmingly noted that some large tracts of land held on speculative motives or those which were acquired on speculative prices were used as collateral for commercial bank loans, which potentially threatened the stability and sustainability of the countries’ financial systems. It was also clear that landlessness was looming. Noteworthy was also the fact that speculative land prices triggered urban sprawl. This study contributes to literature on improving land management practices in emerging land markets, especially in the wake of rapid urbanisation and fears of rural land grabbing and food insecurity.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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