- As building materials prices skyrocket, labour cost up 50%
- Housing deficit to widen
For a Ghanaian, the final piece of a successful career is to have a place to call home – but that dream is quickly fading for many due to rising cost of building materials, a higher cost of living, and falling value of the cedi.
Prices of all building materials – including cement, iron rods, wood, nails and paint among others – have being on the up since 2020, increasing by an average of over 50 percent per annum and thereby dashing homeownership dreams of the majority of Ghanaians.
A bag of cement that sold at GH¢38 to GH¢39 in 2020, now sells at GH¢60 to GH¢62 – a 59 percent rise, depending on brand and location; meanwhile, a tonne of iron rods which began the year at GH¢4100 now sells at GH¢6200, representing a 51 percent increase – throwing a spanner into government’s efforts to narrow the current housing deficit of about 1.8 million units.
“It is affecting everyone; those who are building or buying,” says Executive Secretary of the Ghana Real Estates Developers Association (GREDA), Samuel Amegayibor. “If you had started building in the last quarter of 2021 and had, say, six months to complete the project, you would be greatly affected because prices have completely gone overboard.”
To paint a picture of how bleak things are for the industry, Mr. Amegayibor said most projects that began last year are either on hold or being renegotiated.
Mortgages, meanwhile, have not been spared, since rates are usually pegged against the dollar but payable in cedis. Although this cushions sellers against market fluctuations, it exposes buyers to huge risks. For instance, the local currency has lost over 18 percent of its value against the United States dollar beginning January this year.
The situation is worsened by the fact that apart from having to pay more to own a house than usual, Ghanaians also have to pay more for foodstuffs, utilities and other basic needs from the same income, due to rising cost of living.
“At the prevailing market conditions, it is nearly impossible for any contractor who had started a project before the beginning of this year to survive the price onslaught – if you want to maintain the same quality,” says Ismaila Issah, a building and construction consultant and project manager.
As of last year, Mr. Issah said he paid GH¢100 and GH¢80 per day as labour cost for a mason and a labourer, but now pays GH¢150 and GH¢100 – a 50 percent increase in cost. “Imagine a project I started last December, how much extra cost burden I have had to take on,” he said, adding that prices of all materials including wood, nails and paint have shot up significantly.
Warning signs ignored
Mr. Amegayibor says that what is happening in the real estate or building and construction sector does not come as a surprise. He said when prices started shooting up in 2020, blame was placed on the COVID-19 pandemic.
“The reality is that we are heavily dependent on imports for our building materials,” he said, noting that with more than 70 percent of all building materials coming from imports, the industry is highly vulnerable to external shocks. Currently, he said, local steel production accounts for only 40 percent of demand, with the remaining 60 percent coming from imports.
The country is also heavily reliant on imports for other building materials such as cement, particularly silica – the main ingredient for cement. “For example, much of the steel comes from Eastern Europe, particularly Russia and Ukraine. But given the ongoing conflict between those two countries, prices have shot up astronomically. Freight cost has also gone up by 30 percent since it has become very difficult to bring in materials from there because of the conflict,” he lamented.
To correct the current situation, he said focus must be on strengthening local production capacity and, most importantly, government as the biggest spender must show an example for others to follow by prioritising domestic products.
“COVID has taught us that if we depend on importation we will suffer a lot. So, I believe government must lead the way in terms of using local building materials and expertise,” he advocated.