28/09/2026
The Economics of Real Estate Investing in Ghana [Part 24]: The Location Premium Trap - When Paying more for a Prime Address Stops Making Economic Sense
In real estate, we often hear “location is everything.”. In Ghana, properties in prime areas such as Airport Residential Area, Cantonments, Labone and East Legon can command substantial premiums because of accessibility, infrastructure, amenities, security, tenant demand and scarcity.
Research on Ghana’s property market confirms that location is an important determinant of property values and rents (Asabere, 1981; Anim-Odame et al., 2010; Owusu-Manu et al., 2019). But here is the critical question, is every property in a prime location a good investment at its asking price, absolutely not necessarily.
A good location has value. But there is a point at which the premium paid for that location becomes economically difficult to justify.
Consider this simple illustration.
Suppose Apartment A costs GH¢3 million in a prime location and rents for GH¢18,000 per month.
Apartment B costs GH¢2 million in a good but less expensive location and rents for GH¢13,000 per month.
Apartment A costs GH¢1 million more but generates only GH¢60,000 additional annual rent.
Therefore, the investor must ask, "is paying the additional GH¢1 million justified by the extra GH¢60,000 annual income, plus any expected advantage in appreciation, liquidity or risk?
That is the real investment question. The mistake is to look at the prestige of an address and assume that its price must automatically be justified. A property can have:
▪️An excellent location
▪️Strong tenant demand
▪️Good infrastructure
▪️A prestigious address and still be overpriced as an investment.
This becomes even more important when buying land for development.
A developer should not ask only, “how much does land cost here, but also be interested in knowing "what can I economically develop on this land, what will the completed project be worth, and therefore what is the maximum I can afford to pay for the land?”
The same principle applies to rental property. Look beyond the address and examine:
▪️Purchase price + rental income + operating costs + financing costs + expected appreciation + liquidity + risk.
▪️Location should be treated as one component of value, not as a substitute for investment analysis.
An emerging location can sometimes offer better economics than a prestigious address, although it may carry greater infrastructure, liquidity and development risks.
The objective is therefore not simply to buy the best address but to acquire the best economic value for the capital committed.
In real estate investing, a good location bought at the wrong price can still be a bad investment.