Real estate dethrones ICT sector to become new driver of economy

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  • Expert attributes to new players, pandemic-induced demand

After going through torrid times at the beginning of the pandemic year which saw it contract for two consecutive quarters, the real estate sector has come out strongly – this time even unseating the information and communications sector to become the new driver of economic growth in the last quarter of 2020.

Data published by the Ghana Statistical Service (GSS) have shown that the real estate sector surprisingly grew past all sectors of the economy in the final quarter of 2020, recording 43.5 percent growth – emerging strongly from the -6.6 percent and -23.1 percent it recorded in the third and second quarters respectively.

Prior to this development, it was the information and communication sector that had been reigning as the driver of economic growth for some time now. For example, in the second and third quarters of 2020 it grew by 23.2 percent and 32.6 percent respectively, further cementing its position as the new driver of economic growth – especially when the pandemic encouraged and forced many activities to go virtual.

However, the sector’s performance saw a dip in the third quarter as it recorded 22.5 percent and rather worked to the advantage of the real estate sector, which saw almost double-growth a 43.5 percent in the same period.

Commenting on what could have accounted for the sudden toppling of the information and communication sector by the real estate industry when all odds seem to be against the latter, a real estate consultant, Kwame Obeng Adjinah, attributed it to new players in the industry who have tailored their services to needs of the market and departed from the traditional approach of building large and expensive properties; thereby, making their products quite affordable to the middle-class.

“Currently, we have the real estate market flooded with micro to small-scale developers. These are not very big players. They do a few units or properties and sell, unlike the big players. There is also another segment that has become very popular these days; they do a lot of apartment complexes and rent them out, and it is currently booming. There is also the aspect of land acquisition and sales, and people are doing a lot of service plot sales,” he said in an interview with the B&FT.

Asked why this development is coming at a time when people rather expected the real estate sector to see reduced activity, Mr. Adjinah said the pandemic’s impact on usually preferred sectors for investors could have influenced this, as some started diverting their investments into real estate given it is less risky. Again, he said, people abroad also started coming home, and that increased demand for housing.

Kwame Obeng Adjinah

“When COVID came, a lot of the sectors started going down; and the real estate sector is one of the safest to invest in. So, many people who previously would have invested in stocks or some shares of a company started putting their monies into real estate.

“People abroad also started coming home, and when they came it increased demand for housing. The only sector that is suffering now is commercial real estate, and that’s because of the working from home issue. So, if you go to many office complexes there are vacant spaces up for rent. But when it comes to housing, if people are not working from the office, they will definitely work from home,” he said.

Asked whether he thinks the sector’s growth is just serendipitous or something that can be sustained in the future, Mr. Adjinah was positive that the growth will continue.

“In the short- to medium-term, I expect things to be much better in the sector; especially now that government has introduced the National Housing and Mortgage Fund, which is to complement housing acquisition. Ghana continues to experience a serious housing deficit, and so now that investors have realised the sector is as booming as any other sector – and even gives more mark-up and has little risk, I expect things to continue to rise.

“When COVID subsides and people start returning to offices, I expect things to be much better because it means the commercial segment of the market will start benefitting more. Once the economy also starts picking up, we will get a lot of expatriates in the country; and that will increase the rental demand,” he said.

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