KONZA CITY: ECONOMICS OF LAND VALUE

KONZA CITY: ECONOMICS OF LAND VALUE

 

Land is a very important resource that allows citizens of a particular country to be productive.

The value of land determines the productivity.

High land price reduces productivity in that citizens will have to fork out higher to obtain land hence limiting access to this major factor of production. Citizens will in turn reduce productivity since they are unable to access land.

High land value also results to high rents and property sales after development. These high rents and sales in turn result to increase in costs of production hence a slow down to the economy.

 

Land value.

Land value is controlled by various factors. In Romania, the high property value that eventually resulted in a property bubble was caused by the below factors:

1. Growth of the Banking industry, resulting in easy availability of mortgage.

2. Romanians in the Diaspora having money to buy properly in their country.

3. Growth in the economy resulting to more people employed.

4. Before 2005, there was minimal investment in real estate hence a very high demand for property . Government was not investing in infrastructure hence very high demand for property close to existing infrastructure.

5. Money laundering which brought a lot of money into Romania.

6. Unregulated Real Estate agents who  increased prices of property from the actual amount demanded by the owners.

http://en.wikipedia.org/wiki/Romanian_property_bubble

The above situations are very similar to the Kenyan real estate scenario.

The Florida Land boom of the 1920s.

In the 1920s, Miami was publicized as a perfect city. Prospective investors from the rest of the world flocked to have a share of the real estate. Speculation on property resulted in the increase in the value of land. The speculation also resulted in the increase in general supplies into Miami.

 

By January 1925, Forbes Magazine warned that the Florida high land prices were not reflective of actual land value.

New York Bankers and the IRS started to scrutinize Florida real estate boom as a type of mega-sham.

 

Speculators began to have difficulties selling the land at the higher prices. Land value started tumbling down to its actual real value.

Many investors were pushed into bankruptcy, marking the end of the boom.

http://en.wikipedia.org/wiki/Florida_land_boom_of_the_1920s

Conclusion.

The Ministry of Information is implementing the Konza City project on advice by the Worldbank/IFC.

Worldbank/IFC have hired a London based Engineering firm for Master Planning services.

 

In view of the situations described above in Romania and Florida, it’s the duty of the Government to ensure that land value does not overprice artificially, locking out its citizens on the most important factor of production.

In the process, systems should be laid down by the Government [Ministry of Finance, Ministry of Lands, Ministry of Local Government, Ministry of Housing, and Ministry of Roads] to enable land value to play within the market rates such that investors do not loose property value in future as happened in Miami and Romania.

 

Government Ministries should ensure that infrastructure grows in tandem with population, hence reducing demand and scarcity of land serviced by infrastructure which was a cause of property overvalue in Romania. This will also reduce speculation.

 

The Government Ministries can also come up with policies that ensure to keep land to its true actual value.

 

 

Architect Francis Gichuhi Kamau.

info@a4architect.com

+254721410684

Francis Gichuhi (692 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email info@a4architect.com. Telephone +254721410684


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