Real estate market seeing renaissance
The struggling real estate market is leveraging the renewed confidence in the economy to bounce back; with players recording increased activities in all segments.
With a relatively stable currency, removal of ‘nuisance taxes’, continuous drop in inflation and interest rates, players have noted that they are recording increased enquiries which have led to renewal of interest in old projects and new requests for more building materials and homes.
Samuel Amegayibor, Executive Secretary of Ghana Real Estate Developers Association (GREDA), told the B&FT at the launch of the two-day Southern Edition of the maiden Ecobank Housing Fair that majority of the association’s members have all confirmed surge in their business.
“General enquiries have gone up and I believe that mortgage enquiries have also gone up. I am optimistic about the future for the sector because the housing deficit is an opportunity for players to make money.
Unfortunately, I do not have the data to support my statement but due to the constant engagement with our members, they have all reported that declines experienced in the second half of 2015 and the entire 2016 have been arrested and now things are looking up,” he said.
Mr. Amegayibor explained that during the economic downtown, some developers laid off workers, but the cement manufacturers, for example, have recently seen a surge in demand and they are selling more quantities.
The cedi has so far depreciated by 4.6 percent compared to a depreciation of 15.7 and 9.6 percent in 2015, and 2016 respectively. Inflation, which peaked at 19.2 percent in March 2016 has dropped to 11.9 percent by July, 2017.
The President Akufo-Addo led government, upon assuming office, removed and reduced some taxes it described as ‘nuisance’ which included the 5 percent flat VAT rate on real estate sales.
“The announcement of the removal of the 5 percent was good. This means that those who have applications with mortgage companies now have a 5 percent increment in their purchasing power.
If your income level could meet a price of the house at US$100,000 and due to the VAT, it went up to US$105,000, then you miss out. But with the removal, it now gives you the opportunity and now you can go back and speak to your mortgage provider,” he told the B&FT.
He added that even though the dollar to cedi exchange rate is still high, the stability alone gives a level of assurance to consumers. “In Ghana, where our earnings are almost always stagnant, they need to look into the future and when you see the currency’s volatility; you are not interested in taking a mortgage, which is a long-term project. But the stability is good for business,” he added.
Despite the uptake in the sector, Mr. Amegayibor noted that government must act quickly to sustain the gains. “We have been talking for too long. What is needed is the drive to arrest the issues. If we have issues with land acquisition and long term financing, what are we doing about it. To fix the housing problem in this country, everyone, including government, must play an active role,” he said.
Ghana’s population is expected to reach 32.2million by 2020, and with about 57 percent living in the urban centres, the current housing deficit, which is estimated at 1.7 million units, is expected to rise to 2 million units in 2018, which means the country will need about 200,000 housing units per annum for the next decade.
Ecobank Housing Fair
The two-day Southern Edition of the maiden Ecobank Housing Fair, which ends today, seeks to provide a platform for financial institutions, real estate developers, regulators, and consumers to meet and find lasting solutions to the growing housing deficit in Ghana.
“As a bank, we rely on our strong balance sheet size to structure and provide to our customers medium to long term financial options at very competitive interest rates,” Morgan Asiedu, Executive Director of Legal, Human Resource and Compliance at the bank said at the opening ceremony.
Collaboration is the way forward
Mr. Asiedu noted that the only way to solve the growing problems in the housing sector is through extensive collaboration between financial institutions, real estate developers, government and other regulatory institutions and consumers.
Some of the problems facing the sector include complexity of the land tenure system, cumbersome land registration processes, poor infrastructural development especially at the city outskirt, high cost of building materials and construction labour, and poor financing options with prohibitive interest rates.
Others include poor knowledge of the housing market by potential home owners, lack of reliable data on housing and unwillingness of some financial institutions to provide funding for real estate development.
These issues, according to Mr. Asiedu have dire consequences on potential homeowners. “Most of our young men and women in the working class are forced to live at the outskirts of our cities and other commercial towns where they live in sub-standard dwellings with poor amenities and have to commute long distances to and from their work places.”
“The task of providing good accommodation for the nation’s working class is certainly enormous and cannot be borne by government alone; it requires the strong participation of the private sector. This is why we at Ecobank have taken it upon ourselves to create this platform,” he noted.