Introduction:

It is important to note that unlike man-made assets such as buildings, machines, or vehicles, land itself does not wear out over time or become obsolete. In this sense, the physical land itself doesn’t depreciate. However, factors such as: economic, social, and environmental, can possibly engender the depreciation of a landed property.

The purpose of this article is to identify those factors that can bring about landed property depreciation.

Economic Factor:

Economic trends can influence the demand for land. In areas with booming economies, land prices may appreciate because of increased demand for commercial and residential properties. Conversely, in areas where the economy is struggling, demand might decrease, leading to potential depreciation in land value. This is why we often advice our clients to buy landed properties around the Likki Free Trade Zone. This zone offers a lot of opportunities in terms of commercial development with the likes of: The Dangote Refinery and The Lekki Deep Sea Port. This commercial concentration automatically means lands around this area will appreciate rather than depreciate.

It is also vital to note that buying lands in struggle economies isn’t a complete no. An economy might be struggling today and by tomorrow, the whole scenario is completely different. Our advice will be, talk to a reputable company like Prestige Realties and Investment Limited to gain the required understanding of land trends so your funds will be invested correctly.

Infrastructure and Development:

Before you invest into that landed property, you need to ask yourself this question, what are the infrastructure and development tendencies of this location? Also, you must do your research to discover if the existing infrastructures and development projects will ultimately be relocated by authorities. Another major concern should be, is there any plan by the government to move undesirable facilities there in the future. If not discovered early, it is possible to see the value of your land depreciate drastically. For example, if after buying a land you discovered that the next plot is a proposed site for the state mortuary, what do you think will happen to the value of that land? Think!

Environmental Factors:

Environmental changes or events, such as flooding, erosion, or environmental contamination, can lead to a depreciation in the value of a land. For example, unknowingly buying a land in a contaminated area can drastically reduce its value. The reason you need to buy your next land from a reputable company is to avoid such surprises.

Social and Demographic Trends:

Migration patterns, population growth or decline, and social preferences can impact land values. For instance, urbanization trends might lead to increased land values in city centers, while rural areas could see reduced demand and potential depreciation. A classic example is the city of Warri. Warri used to be the desire of every young Nigerian due to the number of companies that were there. Today, due to the relocation of many of these mega companies, landed properties are not in the same high demand as it used to be when these companies were present. The result is depreciation in value.

Speculation:

In some cases, land values can be influenced by speculation. If investors believe that a particular area will become more desirable in the future, they might buy land there in anticipation of future price increases, driving up current land values. Conversely, if investors believe a particular area will not be desirable in the future, they may avoid buying lands from there, which will mean depreciation in value.

Conclusion:

It is beyond just liking a piece of land and investing into it. It’s crucial for landowners or potential buyers to be aware of these factors and monitor trends that might affect the value of their land holdings.

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