Investment banker cautions against real estate …Profitability slows amid low occupancy

Despite the ever-widening housing deficit of the country, investment banker and Chief Executive Officer of Databank, Kojo Addae-Mensah, has said that people looking to invest in the real estate sector could be disappointed as the sector may not be as profitable as it is made to seem.

Mr. Addae-Mensah, speaking at a breakfast forum organised by First Atlantic Bank on wealth-creation, said the real estate sector appears to be on a downward trend in terms on returns on investment due to a number of factors – such as a supply glut and decline of foreign investment in the sector.

“Real estate has slowed down quite considerably. There was a boom in the real estate sector with the anticipation that there would be high occupancies; but that hasn’t materialised. There is a glut on the high-end side of the market – I don’t think the low-end of the market has much of a problem,” Mr. Addae-Mensah said.

The Databank CEO spoke on the theme ‘Wealth creation through portfolio diversification’, and took selected clients and guests of First Atlantic Bank through a raft of options available for the maximisation of return on investments.

According to him, the real estate sector – although seeming popular for most investors – could prove a daunting option when compared with other investment options such as mutual funds, bonds and fixed-deposits.

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He said people who have made investments into real estate could find themselves in trouble when they are hard pressed for funds and need to liquidate their investments. In such cases, these investors would most likely take a hit – as they might be forced to cut their asking price considerably just to push through a sale.

Mr. Addae-Mensah stated that the risk-appetite level of investors will also determine the portfolio they subscribe to – adding that eventually these real estate properties will be occupied, but in the long-run; and thus anyone that looks to put their money into these investments must be prepared to lock-up such funds beyond a certain number of years.

The need for wealth creation

Speaking at the forum, Odun Odunfa – MD/CEO, First Atlantic Bank – said the bank has set for itself the broad objective of creating an institution that is responsive to the needs of its customers, and has also positioned as a partner for individuals, businesses and other corporate institutions both locally and internationally.

“It is gratifying to note that wealth creation and investment on behalf of our clients is very key to our business as a bank, hence the reason for our gathering this morning to discuss how we can work together to create wealth through diversified portfolios.

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“Our vision is to be a global bank out of Ghana, with value propositions geared toward identifying customer needs and expectations and providing tailored value-adding solutions for those needs, such as this forum,” he stated.

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