There is an increasing demand for residential, as well as commercial property in Ghana amidst low supply in the Real Estate market which has brought about a huge deficit in the sector. The government, together with other developers are trying its best to address this situation. In spite of this, there is an increasing need for investors (both domestic and foreign) in the sector to help close the housing gap or reduce the deficit. In relation to this, we decided to provide a brief analysis of the real estate market in Ghana and to also point out the various areas in the sector that needs the attention of potential investors.
This article provides an analysis of the Ghana real estate market which is increasingly becoming one of the most patronized markets in Sub-Saharan Africa. It provides a brief overview of Ghana’s economy and recent developments in the economy, especially in the real estate sector. The article also discusses current trends and segments in the real estate sector and provides some future projections and prospects in the real estate industry in the country.
Ghana’s economy in recent times has been growing at a higher rate compared to other countries in the West African region. For instance, the economy accelerated to 8.1% in 2017 (World Bank 2019). The country’s economy has a market base component with less investment and trade policy barriers. Its natural resource endowment is also massive. Some aspects of the economic growth of the country can be attributed to the oil discovery a few years back, increasing foreign direct investment, agriculture, and industrial development, amongst others. The country, like other African countries, is heavily dependent on its agriculture sector to provide for most of its economic needs and also employs a large number of the labor force in the country. The sector contributes to about 20% of the country’s GDP (CIA, 2019). The major commodities that generate foreign exchange for the country are cocoa, oil, and gold. According to the World Bank (2019), the economy accelerated to 8.1% in 2017 attributed to growth in the oil and mining sector. The economy’s growth in 2018 was much slower compared to that of 2017 with a figure of 5.6%. However, growth in 2019 is expected to be higher with a target of 7.4%, which is much higher than the 5.6% in 2018 (World Bank 2019). This is also expected to be driven by the oil, gas and mining sectors.
The economy is being faced with various challenges, some of which are the issue of electricity and its distribution amidst falling oil prices. This notwithstanding, there is the recent crisis in the banking industry where bank owners are losing their firms due to the financial sector clean up by the current administration. This is happening as a result of the failure of these banks to meet the minimum requirement set by the Central Bank of Ghana. In spite of this, the business environment in Ghana is still sound and booming.
One sector that is growing at a faster pace at the moment in Ghana is the real estate industry. The sector is being patronized by both domestic and foreign investors or multinational organizations who want either office space or accommodation for their workers and expatriates.
REAL ESTATE MARKET
The real estate sector in Ghana has become one of the most interesting sectors, moving at a significantly faster pace. There was an upsurge in the demand for a real estate property, spurring growth in the sector from 2007 to 2013. Growth in the sector, however, slowed alongside the fall in commodity prices in 2014 and the depreciation of the cedi in 2016 and 2017. These affected the demand in the real estate sector. In 2017, the government of Ghana started making efforts to boost the sector by abolition the value-added tax of 5% on sales in the real estate market.
The real estate development sector has three major areas whose activities are facilitated by the banks and the mortgage markets. These areas are the public sector real estate development, private sector real estate development and private individuals. The private sector participation in the real estate market is massive and impressive compared to that of the government which is minimal.
The three major segments come with three different segments, thus, the residential, commercial and industrial segments. According to the Ghana Investment Promotion Centre (hereafter, GIPC) (2019), the property market in Ghana is dominated by residential and commercial developments with the residential market being the most active. Transactions in the residential market alone can be estimated at 85,000 yearly since the past decade, valuing around US$1.7billion (GIPC, 2019). The commercial segment is the second-largest while the industrial market is significantly smaller in size. The residential ones are mostly patronized by first-time homeowners, retirees, seniors, newlyweds, new parents and other individuals of related interests. The commercial market mostly consists of sale and demand for property for retail and office space whereas the industrial segment comprises warehousing facilities and light industrial parks.
There has been an upsurge in demand for housing in the urban areas of the country, especially in Accra, Kumasi and Takoradi owing to the increasing number of migrants from then rural areas to these areas. Aside from this, these three are the most populous cities in the country hence the demand for either accommodation or office space for the businesses by individuals as well as companies and other agencies is on the rise. However, the real estate developers in the country have not been able to meet the yearly demand for housing in the country. According to the Ministry of Water Resource Works and housing, the high demand for real estate in the country has brought about housing deficit with a rate being purge at 2.5 million units in 2019. To address this situation, the government is entering into a partnership with private real estate developers in others to provide access to affordable homes to individuals. A typical example is the official launch of the National Housing Policy in 2017, the establishment of the National housing fund and the construction bank to help individuals and real estate developers to access loans to finance real estate development projects. A recent intervention is the launch of the US$5 billion affordable housing project in Accra by the Ministry of Works and Housing, done in collaboration with the United Office for Project Services (UNOPS) and Sustainable Housing Solutions (SHS) in August 2019.
These notwithstanding, there are lots of investment opportunities in the real estate sector. For instance, there is a high demand for hostels in various public and private universities. Real estate developers (both foreign and domestic) who wish to invest in this sector could look at constructing hostel in and around these universities. Hotels are also on high demand in the country and as such investing in this area would be very beneficial to the property developers.
The real estate sector in Ghana has come to stay. It is going to be the backbone of the economy in the next few years. The sector is going to keep expanding alongside the growing population of the country as well as the booming oil sector. This, in turn, would bring about an increase in the economic growth of the country. On one hand, the increase in Ghana’s population would increase the individual’s demand in the real estate market, which would eventually boost the economic growth of the country. On the other hand, the economy will grow as the oil sector grows which increases the income level of some individuals who in turn affects the real estate market. This shows the strong correlation between the real estate sector and the economic growth of the country Also, there is an increasing level of foreign investors coming into the country. This would increase the demand in the sector, hence the growth in the economy of the country.
The real estate sector has a lot to offer individual Ghanaian citizens, foreigners, multinational organizations and travelers alike. In relation to this, we expect that investors, both domestic and foreign would continue to show greater interest in the real estate market alongside the increasing demand in the market.
Author: Belinda Frimpong-Wiafe, Economist
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