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Ghana's property boom

  Photo: Dynamic real estate market.
  Dynamic real estate market.
Ghana's growing population, robust economy and favourable investment environment make its real estate market increasingly dynamic.

In spite of complex issues over local commercial lending requirements and land ownership, demand for housing spans the entire spectrum of the population, from properties for wealthy Ghanaians and a growing number of expatriates, through to cheaper accommodation for a rising middle class and lower-income group.

The roots of the current housing market boom began in the early 1990s, when the financial sector was liberalised. Expansion has since gone hand-in-hand with that of the economy as a whole.

As a note of caution, there have been occasional setbacks and slowdowns during periods of economic turbulence.

However, Ghana's growing property demand has not gained a great deal of international attention.

But with Ghana becoming one of the fastest-growing countries in the world - the IMF expects GDP there to rise by 7.3% this year following 13.5% in 2011 - investors and authorities alike are realising the potential and importance of the nation's real estate sector.

Last month, the government sealed an agreement with the Ghana Real Estate Developers Association (GREDA) reaffirming a commitment to encourage the growth of private real estate firms to meet the country's housing needs.

This is particularly so at the lower-end of the market, over which there has been comparatively limited activity.

Ghana has an encouraging framework for real estate investment, with freely-transferrable capital and profits, but projects have generally concentrated on the middle and the top of the market, where margins are bigger and demand has remained stable.

As a result, a shortage of affordable housing is one of the biggest challenges facing the country.

The gap between supply and demand is most acute at the bottom of the income scale, and local and international developers are showing increasing interest.

Speaking at a workshop on housing, Nii Nortey Dua, the Ghanaian Deputy Minister for Water Resources, Works and Housing, reiterated the government's commitment to reform to encourage private sector property development.

Overall, Ghana is estimated to have a shortfall of around one million units.

"We are willing to partner [with] the private sector to remove all the obstacles facing them so as to improve the socio-economic well-being of the people," Dua said.

He added that investment and public-private collaboration could help the country meet the objectives of the Better Ghana Agenda, the government's national development programme.

The country did just that with South Korean conglomerate STX Corporation, with a plan to build 200,000 housing units worth some US$10 billion, but after negotiations failed in January, President John Atta Mills announced that the project had fallen through and that he was looking for alternatives.

The government recently decided to repossess all assets advanced to STX, including 15 land sites across the country.

Rising demand for better class homes

In spite of the renewed push on affordable housing, the rising level of per capita GDP and the growing number of white collar expatriates still draw a number of developers to the higher end of the market, and gated communities are proliferating in the wealthier neighbourhoods of the capital, Accra.

"Initially, middle and high-end homes were [bought] largely by non-resident Ghanaians and foreigners, but gradually the middle class in Ghana is growing and local Ghanaians are patronising such homes," said Samuel Ewool, Executive Director of Buena Vista Homes, a Ghanaian builder and developer.

"There has also been a remarkable increase in the number of foreigners from the West African region buying property here as investment because of the political stability in Ghana."

Kofi Ampong, the CEO of real estate firm Broll Ghana, agreed. "On the residential side of the market, there has been a huge growth in terms of short-term lease of apartments for expatriates," he said. "Since there are so many companies that are setting up base in Ghana to serve West Africa, there is a lot of demand for housing for people that come and stay for a couple of months."

However, the sector is still constrained by some fundamental complications that limit the capacity for more robust expansion.

One of the most significant drags on residential real estate growth has been the difficulty of obtaining a mortgage. High interest rates - over 20% in many cases - and relatively low disposable incomes make housing purchases difficult even for many middle-income families.

Many resort to a traditional model of home building, whereby construction of a home is done in stages as cash becomes available.

Nonetheless, Ampong noted a growing willingness among banks and other lenders to provide home loans, whether through traditional mortgage structures or other forms of periodical payment. This, in turn, has driven demand for middle-income housing, which developers are increasingly able to meet.

In fact, the secondary and rental markets have helped further spur increased ownership. Rents for the better properties in Accra have soared in recent years, incentivising home ownership over tenancy, as well as making property an attractive investment for those able to build up a portfolio.

from Ali Fakha, Dubai Office

Broll Ghana Tel: (233) 302-669-852, (233) 302-673-474
Fax: (233) 302-673-516
Web: http://www.brollghana.com
Buena Vista Homes Tel: (233) 303-401-401, (233) 303-402-281, (233) 27-7707-658
Fax: (233) 303-401-401
Email: info@mybuenahomes.com
Web: http://www.mybuenahomes.com
Ghana Real Estate Developers Association (GREDA) Tel: (233) 302-782-531, (233) 302-960-750, (233) 24-130-1973
Email: info@gredaghana.org
Web: http://www.gredaghana.org
Ministry of Water Resources, Works and Housing, Ghana Tel: (233) 302-665-940
Fax: (233) 302-685-503
Web: http://www.ghana.gov.gh/index.php/governance/ministries/324-ministry-of-water-resources-works-a-housing

Content provided by Hong Kong Trade Development Council
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