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Land, a significant factor of production essential for the stipulation of housing services and production of agricultural goods, is also stressed as a remarkable and dependable asset; a reliable way around unexpected inflation. It is a highly esteemed means of saving wealth and can be deemed as the most significant factor of production.
The association between people and land has an extended history in Ethiopia. Almost 90 percent of the country’s population has been known to depend on land as a source of livelihood. It has been the reason for many battles and disputes throughout history which proves the tie that people have with their respective piece of land.
Land is currently under public ownership in Ethiopia; which means those that are interested in acquiring a piece of land are to lease it from the government. The 11th round of Addis Ababa City Administration land lease auction was just the latest in a series of ever-astounding and unfair raises in lease prices.
The 11th round of Addis Ababa City Administration land lease auction, which was held on Friday December 5, 2014, featured a 449 Square Meter plot of land located at a place commonly known as Berbere Terra being sold for a total cost of 137.8 million birr. This summation was derived from a 307,000 birr per square meter which is by far the highest amount of bid ever made in the city. What is even more absurd is that the floor price for this plot of land was 1,323 birr.
This typical rise in lease prices means that Addis Ababa is in danger of becoming one of the world’s most expensive cities. Cities with prices like this are some of the world’s biggest and are filled with people who can afford to pay large chunks of money for a single square meter. However there are few local residents of Addis Ababa that can afford to throw USD 10,000-USD 15,000 bid per square meter.
Let us, for a moment,take a step back and view the recent bouts of land lease auctions held in this city. The study shows a far-fetched and unstable amount of price increases that just skyrocketed from amounts of thousands to hundreds of thousands in a matter of three months. If prices continue rising at such an intense rate, who will be able to afford living in this town for long? The highly esteemed and aspiring business owners, who are able to multiply a floor price by 232 times to obtain a mere 449 square meters plot of land? Or the low and middle class part of population that work to sustain themselves? If the amount of lease price has reached such a level, how is the larger number of population of this city supposed to acquire a piece of land to his or her name?
The winning bidders, a group of business owners from the Merkato area are said to be planning to build a G+8 storey building that will be used for commercial purposes. However, once this building is finished and commences, who is going to afford to pay for the products and services that are to be offered in this building? Better yet, who can afford to rent space in such a building? Because whatever these groups of business owners have spent on this plot of land, they are convinced they can earn back.
It is hard to enumerate the aim of some business owners who would spend such absurd amounts of money to beat down the competition. A piece of land that could have easily been acquired for half or quarter of the final amount they bid, is now preposterously auctioned off for an amount that makes most wonder about the future price of land. During the 10th round of Addis Ababa City Administration land lease auction that was held in September 2014, the city administration received an offer of 55,597 birr per square meter. The current bid however has encountered an 18% increase in only three months.
Auctions may be wide-ranging in their nature to the point where it’s hard to place a ceiling price on them as they mainly focus on acquiring the highest price possible. However, since this is a land lease auction, the administration must find a way of incorporating those that are fairly able and competent in leasing land. Focusing merely on acquiring the highest bid will create problems in the long run including high rents and prices for goods and services.
There are nagging questions in the air; have we seen the last of it? Will the next round of land lease auction bring us more surprises by adding to the already unnecessary and unwarranted price hikes? If so, for how long are we going to afford to live in one of the more expensive cities of the world? Is Addis Ababa becoming a city where some can afford to buy leisurely while others can barely afford the minimum?