T-bill rates decline Turn to real estates-Expert

Investing in real estate in Ghana offers a secure and higher return on investment than most financial products currently on the market, especially in the face of dwindling returns on Treasury securities rates, Eugene Birikorang, Sale and Marketing Manager, Devtraco Plus, a signature real estate development company, has said.

“For the matured economies, interest rates and the earnings on your real estate investments are very low. For example, if you if take out an investment in New York you are going to get somewhere between 2-3 percent return on your investment. If you did anything like that in London you are going to get between 3-4 percent. So, in most of these matured economies, return on investment is very low.

“But when you come into an emerging market like Africa, and specifically Ghana, you have a decent amount of risk but then you get a decent amount of return on your investment. So, if you invest in Dubai you are going to get returns of around 7-8 percent; New York, 4 percent; and London 3-4 percent. But if you invest in Ghana you will get a return of between 12-14 percent. The figures speak for themselves. Real estate is very profitable, holding everything constant,” he said.

Given the downward trend of the Treasury securities rates, the real estate market has emerged as a viable and safe sector for investment.

The 91-day Treasury bill yield declined 753 basis points to 13.3% in January 2018 from 20.9% in November 2016, while the yield on the 182-day Treasury bill yield declined 868 basis points from 22.6% to 13.9% from over the same period.

As at Thursday May 24, 2018, the 91-day Treasury bill yield was 13.3 percent; 182-day bill, 13.8 percent; and the 2-year, 15 percent. 

Analysts have argued that unlike a bond which has a fixed maturity date, an equity real estate investment does not normally mature. In recent times, it is not uncommon for investors to hold property for over 100 years.

This attribute of real estate allows an owner to buy a property, execute a business plan, then dispose of the property whenever appropriate. An exception to this characteristic is an investment in fixed-term debt; by definition, a mortgage would have a fixed maturity.

On the other hand, Real estate investment comes with two income sources: annual property appreciation of 5 percent and annual rental yields of about 12 percent. Thus, 17 percent total returns per annum.

Most local investors are buying apartments and homes in prime areas of the country’s capital, Accra, for investment purposes, given the relatively high returns and the lifespan of such properties.

For instance, a Devtraco Plus property worth US$85,000 returns US$10,000 per annum “Real estate is the most secure lifetime and trans-generational investment that delivers way above the normal market rate,” Mr. Birikorang said.                                

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