According to Bank of Ghana 2007 Housing Market Report – “the housing market has become important and strategic to policy makers in recent times due to its impact on output fluctuations and inflation. Generally, activities in the housing industry may affect the wellbeing of a people in terms of size and composition of household wealth, accessibility to credit, labour productivity, employment and other macroeconomic variables.”
Despite this, one wonders why our political leaders and policy makers have still not prioritise housing development. The lack of attention and investment in housing is troubling. This is impacting children’s development and young adults’, the chance to develop business ideas or exploit their full potentials.
There are many factors to be considered when planning the housing needs of a city or country. One of such factors is the housing mix. The Housing Mix is the mixture of the types of housing structures required. This could include apartments, detached or semi-detached family homes, bungalows and block of flats.
The housing needs is also influenced by the size of households and income levels or income profiles of the populace inhabiting the area. Smaller households may need one or two bedroom apartments whilst large families may require more bedrooms.
As stated in the 14 February 2019 publication, Ghana’s real estate developers mainly build to sell. This approach to housing supply has alienated or prevented a lot of people from acquiring decent accommodation or owning a home. This article discusses the untapped rental housing market which is dominated by private landlords who consistently exploit their tenants.
Though some of these houses or structures are not fit for human habitation, Ghana’s increased rural-urban migration is making the situation worse. Ghana Statistical Service living standards survey 2014 report estimate the number of households as 6.6million. The household size for rural areas was (4.5) and urban (3.6). This suggest three to four bedroom houses would be the most sort after accommodation in both communities. With the current population just over 30million it can be assumed the number of households have increased to 7million or more.
With such significant increase in population it is obvious more houses are needed. The Government figures suggest the housing deficit is 1.7million. Even if a thousand residential properties are built in a year it will take us more than a millennial to clear the deficit. The present build to sell strategy is also not helping the situation.
What developers have largely ignored is the rental housing market. Considering the number of households in the country any developer who focus on build to rent is bound to maximise its return on investment. Build to rent offers two benefits – consistent cashflow from the monthly rental income and capital gains from appreciated assets value over a period.
The table below offers us some indicative figures of the estimated market value of the rental housing sector. These are computed based on the following assumptions:
- Estimated households requiring rental accommodation – 1 to 2 million
- Monthly rent is between ¢400 to ¢600
- Exchange Rate (Feb-19) – US$1.00 = GHS5.00
Though the above figures are based on over a million properties. The above suggest at ¢500 cedis per month and with 10% share of the market value a landlord could earn US$8million per month and US$96million per annum. If developers will build to the highest standards, the first 3years maintenance cost would be minimal to zero. However, for renting to be profitable, developers would have to establish an effective and efficient housing management organisation to run the operations.
The would-be investor of the rental sector should also have 5 to 10 years development plan and ambition to exceed the breakeven point of their housing stock during that period. This lack of understanding and knowledge of housing services management or operation is why many have literally ignored the build to rent market.
The rental housing market offers great opportunity for business growth and rapid housing development. According to the Ghana Housing Profile 2011 report there are over 2million government workers who could benefit from a rental housing scheme. This is besides those in self-employment or in the private sector. Just paying 500cedis per month to secure a decent accommodation would offer significant benefit to the investor and tenant.
We can only truly say we are offering affordable accommodation when rents are less than 50% of tenant’s monthly income. Ghana has a substantial and significantly untapped rental housing market that requires some financial investment. However, those who seek to pursue this as an investment opportunity must have a long-term strategic plan and engage Housing Management professionals with the skills to deliver the services that can guarantee the return on investment.
Profile: Kwadwo Owusu-Darko is an architect and specialises in Housing. He has over 20yrs experience in real estate development, regeneration and housing management in the UK. He was a Director and Chairman of two Housing Associations. Currently working towards setting up a think tank to support Housing development in Ghana.