I’ll start by making a statement that is probably already known to many, especially bitcoiners: money is a form of energy. We expend energy to do work. Then, an agreed-upon form of remuneration that is commensurate with the amount of work put in is earned. The energy spent on that endeavor has now been converted into another form of energy: monetary energy. This does bring to mind the first law of thermodynamics, does it not? Now, it is clear that from the most minuscule events in our individual daily lives to the larger occurrences brought about by forces for which our physical plane of existence is their playground, the world is fraught with instability and chaos at almost every turn, exacerbated by geopolitical disparity and economic volatility on a global scale. This is particularly prevalent in developing nations, as well as in most countries in Africa. With all this in perspective, preserving monetary energy should be of utmost importance to the individual.
I know that I haven’t been a Bitcoiner for long. If I am being completely honest actually, this bear cycle is the first that I’m experiencing. It can be said that I haven’t been battle-tested enough to be considered a veteran with bear market toughened skin in the game. However, I know for certain that in the monetary energy, wealth preservation, and store of value conversation where Bitcoin is pitched against real estate, one of the most popular investment vehicles in modern day society, I would bet on Bitcoin. This conversation has gone on for quite some time already, I know. I also know that some interesting points have been made to back both sides. So, I may not be making any new points per se with this article, but simply emphasizing a few of them concerning the Nigerian context, and the African continent.
Real Estate In Africa
It is easy to think about Africa as just a place for safaris, pyramids, and wildlife. I dare say that that is as misinformed an opinion as one can have. Africa is also a place with skyscrapers, malls, mansions, and impressive urban and suburban structures, developed to cater to different segments of the market. The real estate industry in Africa has been booming over the past few decades, thanks to a combination of factors, population growth, economic development, urbanization, and rising incomes being just a few of them. From Cairo to Cape Town, Dakar to Addis Ababa, African cities have been massively transformed, and their skylines decorated with impressive architectural structures that are always a thrill to behold.
But among all these cities, one that stands out due to its size, diversity, and potential, and is of particular interest to me because I am Nigerian, is Lagos. Lagos is arguably the most populous city in the continent of Africa, and the economic hub of Nigeria, the 14th largest country in the continent by land mass. The city has a vibrant real estate market that offers opportunities for investors as well as developers. From skyscrapers in Eko Atlantic, luxury apartments with stunning views of the Atlantic Ocean, and beachfront villas in Lekki, to affordable housing units with modern amenities, or commercial spaces in prime locations that offer visibility, exposure, and accessibility, the city has it all. Projected to be one of the world's megacities by 2030, Lagos does indeed have a lot going for it and has a strong position in the future of real estate in both the country and the continent as a whole.
The Caveat
As appealing as real estate in Lagos and any other city in Nigeria, as well as Africa may seem, it doesn’t come without its share of discommodities. These discommodities are some of the points that have been made against real estate investment as a sound vehicle for wealth preservation. From property taxes that have been known to be a complex maze that can leave an uninformed investor spinning in a head-splitting confusion, to excruciating construction costs that can drain a developer’s resources. From the constantly depreciating value of the Nigerian Naira to the US Dollar, due in part to the inflation rate in the country that’s currently sitting at 21.8% as of the time of writing, to lack of adequate funding, as a result of the shortage of mortgage institutions and capital markets that are often inaccessible to the average developer or investor, and where accessible, stringent, often unattainable requirements, as well as high interest rates, making it an impossible, unachievable option.
These are just a few of the criticisms that have been made. However, I’d like to focus on one in particular that might not be relevant in more developed nations where corruption within the executive branch of governments isn’t allowed as much free rein, and that is; state government land/property repossession.
Land/Property Repossession And Reclamation
According to the Land Use Act, promulgated in 1978, which regulates land usage and ownership in Nigeria, all land in the different states is vested in the governors, held in trust for the people, and statutory or customary rights of occupancy by individuals or organizations are granted by the governor for various purposes. It is also stated that the governor holds the power to revoke right of occupancy, for overriding public interest and purposes, such as road construction, urban developments, mining, mineral exploitation and the likes.
The Act also makes provision for the payment of a fair compensation to the affected landowners or occupiers of properties repossessed by the state government. The problem is that despite the provision for the fair compensations in such scenarios, there are cases where these compensations were either non-existent, or inadequate, which have led to prolonged litigations that have often led to the overall abandonment of the property by the owners. There have even been cases where these litigations led to favorable judgements, but the governments refused to comply with court mandated orders.
Although these cases aren’t so recent, there hasn’t been any known amendments to the law to prevent such incidents from recurring, nor have there been reports of full settlement of those outstanding compensations.
Speaking of recent cases, in October 2023, in a bid to tackle the perennial flooding that has plagued some parts of the state, the Lagos state ministry of environment undertook yet another massive demolition of properties said to have been built on drainage channels in various areas of the state. As expected, the affected residents of those demolished properties have had to bear significant losses running into billions of naira because the affected areas are located in some of the affluent parts of the city. It would be easy to put the blame on the individuals who purchased properties designated to be drainage areas, but it isn't that cut and dried. In a system riddled with corruption and self-serving government officials, it's easy for an individual to purchase a property that seemingly has all the right papers and approvals, only to end up bearing losses, the likes of which not a lot of people can recover from.
Now, let’s leave Lagos, and head towards the south-western part of the country, to Benin city, the capital of Edo State. This is a slightly different case, in that the main culprit here isn’t the government per se, but a phenomenon commonly called; land grabbing. This is a scenario whereby certain individuals or groups of people, illegally acquire large expanses of land, by claiming ancestral heritage, and then selling those acquired lands to unsuspecting individuals who are none-the-wiser. In most cases, those lands turn out to be designated by the government to be for use for projects that are of public interest.
In 2022, the state government ordered and carried out the demolition of 90 residential houses, in a bid to reclaim 1,229 hectares of land that were sold by land grabbers. As you would expect, the owners of those lands were outraged by this and have expressed their pain. Though the government has stated that due compensations will be paid to those who are able to sufficiently prove ownership of the properties - of which we know how long and painful such processes can be, that’s if they truly intend to carry it out. Imagine how demoralizing and devastating it is to have your home demolished without adequate warning. I personally know a few people who were affected by this incident, and I know what it took from them. Imagine working for decades to secure a home for your family, only to have it demolished in one day, by the state government.
As I earlier stated; the government isn’t the real culprit in this case. However, I earlier mentioned, considering how much of a daunting task it is to verify the status of a property before purchasing it, due to a system, heavily ladened with excessively complicated administrative procedures, one can easily fall into the hands of these land grabbers or purchase land earmarked by the government for public use, thereby risking the wealth you have labored for years for.
Why Bitcoin Is The Better Choice
Before I proceed with this next paragraph, I would love to throw an itty bitty disclaimer out there; as bitcoiners, we all already know why Bitcoin is the better choice, so nothing new will be stated from here on.
With that bit out of the way, let us get into it.
So why is Bitcoin the better choice? The first answer is quite simple really, and it lies right there, embedded in the open source code that runs the Bitcoin time-chain, as well as the philosophy behind its creation. The thousands of nodes spread across the globe, ensures that every single bitcoin in circulation is verified, which means that the average investor doesn’t have to go to any government establishment to ensure the validity of the asset he or she is about to purchase.
Another reason that’s also embedded in Bitcoin’s code and philosophy, is its censorship resistance. Its decentralized nature ensures that it cannot be confiscated by any government. However, due to the fact that cryptocurrency exchanges are bound by the jurisdictions they function in, they are susceptible to government influence, so the best practice is self-custody. As we always say within the Bitcoin space; not your keys,not your coins.
With Bitcoin as a type of property for investment and wealth preservation purposes, you have successfully eliminated those excruciating construction and maintenance costs that have made real estate a nightmare for the inexperienced developer with limited capital. Property taxes are also eliminated, however depending on the country or state one lives in, you are expected to pay capital gains tax when you sell your bitcoin for profit. But, why would you even want to sell an asset that they’ll never make a 22nd million unit of - ever?
Here’s another one. Bitcoin’s innate portability makes it such that you can transfer value across space at near-lightning speed, unencumbered. You already know that moving cash or other physical assets across borders incurs huge fees and subjects your asset to a myriad of hazards during the course of the journey. Then imagine having your wealth stored in physical real estate and then having the urgent need to relocate. You obviously can’t move with it, so you’ll be subjected to offloading your wealth into a highly illiquid market at an unfair price seeing as it’ll be considered a distress sale. But if you hold bitcoin, that’ll clearly not be the case. With exchanges, both centralized and decentralized, spread across the globe, as well as bitcoin’s daily trade volume that surpasses most other major assets, you are offered seamless conversion or trades to your desired currency almost anywhere in the world, with the click of a few buttons, right there on your couch, hassle free.
Conclusion
It's easy to conclude that by this article, the writer, yours truly, is implying that real estate is a bad idea, and that everyone should sell their homes to buy bitcoin. However, that’s far from the case. In the grand tapestry of our evolution as a species, both economically and otherwise, the real estate market, originally designed to fulfill the fundamental human need for shelter. It was meant to be a marketplace that facilitated the buying and selling of properties. But, it has now morphed into an unintended bastion of wealth preservation.
The intrusion of fiat, government-controlled currencies and their monetary policies, has distorted the narrative - a complete shift thereof, that has created an entirely new entity. I know this statement might be seen as an oversimplification of a complex interplay of factors with multiple layers. However, we can clearly see that inflation and regular debasement of fiat money has transformed real estate into a strategic tool for safeguarding wealth. In this complex tussle of economic forces, Bitcoin emerges as a revolutionary counterpoint, functioning both as a decentralized form of money - a damned good one at that - and an incomparable tool for wealth preservation. As fiat currencies continue down the precarious part towards an obvious end, Bitcoin stands resilient, offering the individual a means to transcend the pitfalls of a system that has veered so far from its intended course, from which there just might be no return.
This is a guest post by Emeka Ugbah. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Source: Bitcoin Magazine - Bitcoin News, Articles and Expert Insights