• Friday, March 29, 2024
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BusinessDay

Residential real estate in Ghana offers investors more opportunities, here’s why

Residential real estate

Like Nigeria, the residential real estate submarket in Ghana is upbeat, commanding significant demand, especially for well-built low-rise buildings. It offers investors more opportunities with sustained tenancies and rents than other segments.

Like Nigeria too, the submarket has continued on its growth path evidenced in the continuous supply of new residential units and moderation in vacancies, as could be seen in the country’s big cities of Accra and Kumasi.

But unlike Nigeria where more people are renting than building or buying their own homes, Ghana has a significant homeownership level as more people would rather buy or build than rent. This accounts for the well over 10 percent annual yield which investors enjoy in the market.

In Nigeria, apart from student housing which offers between 18 percent and 22 percent annual yield, return on investment in residential real estate is between 4 percent and 5 percent per annum.

An estimated 42.1 percent of Ghanaians own their dwelling units while 29.7 percent live rent-free, according to a Ghana Real Estate Market Report compiled by Northcourt Real Estate.

This contrasts sharply with an estimated 25 percent homeownership level for Nigeria’s 200 million population and over 60 percent of the population that are living in rented accommodation, spending over 50 percent of their income on house rent.

“Typically, Ghanaians prefer to build and own their houses incrementally which accounts for the moderated intensity of land use,” the report explains. It cites numbers from the Centre for Affordable Housing (CAHF) which indicate that compound houses account for 57.3 percent, while detached and semi-detached houses account for 28 percent and 4.7 percent respectively.

“Huts and flats account for 4.8 percent and 3.3 percent respectively. As high-interest mortgages are the order of the day, the government supports affordable homes by easing access to housing credit for government workers,” Ayo Ibaru, Director, Real Estate at Northcourt, added.

Read also: What Nigeria could learn from Kenya to make housing truly affordable

Overall, Ghana’s real estate sector has expanded over the past three years due to a concentration of developers operating in the mid to high-end segments, the arrival of non-resident Ghanaians as well as foreign investors such as Grit, a German corporate finance and investment management firm.

Demand for residential real estate is driven by a few factors. Accra, for instance, continues to benefit from the interest generated from the 2019 ‘Year of Return’ tourism and investment campaign executed in partnership with the Adinkra group.

“This, in part, contributed to the growth in demand for serviced apartments which remain a better choice when compared with grade A residential apartments (from a pricing perspective) and branded hotels (pricing and Covid-19 restrictions),” Ibaru confirmed.

Though sales transactions initially declined as investors sought to understand their options and reworked their portfolio strategy, Ibaru notes that there has been a gradual return to the developer market for residential assets.

Like in many other economies, including Nigeria, Ghana’s housing market has had its downsides. But now, the market is gaining momentum, boosted by strong economic growth, and the influx of non-resident Ghanaians and foreign home-buyers, according to local real estate experts.

Lalaine Delmendo, a real estate analyst, quotes Jones Lang LaSale (JLL) as saying that “Ghana’s economic growth and increasing supply of prime real estate assets make it one of Africa’s most interesting markets for investors.”

JLL, a professional service company specializing in real estate and investment management, notes that “the capital, Accra, is well placed as a hub for business and travel in West Africa and it is expected to pick up in the real estate market to reflect that in the mid-term.

The International Monetary Fund (IMF) had, before now, predicted that Ghana would become the world’s fastest-growing economy with estimated GDP growth of 8.8 percent which is double the pace of the emerging economy average and well ahead of world growth at that time.

Delmendo says Ghana has seen a steady stream of European and American passport holders of African descent arrive at Kotoka International airport in recent years, as a response to the country’s resource boom and strong manufacturing growth.

“They come for what seems like the limitless opportunities in what has often been seen as one of Africa’s best-run countries. Ghana’s mining sector, specifically gold mining, has witnessed a massive influx of multinational mining companies – increasing the demand for expat accommodation further,” he says.