AFFORDING MORE

Ghana 2016 | CONSTRUCTION & REAL ESTATE | FOCUS: SOLVING THE HOUSING DEFICIT

Affordability is becoming a major driver in Ghana's real estate market. The construction sector has thus far failed to deliver rentable space for the majority of Ghana's housing needs and the government is calling on more to be done by the private sector.

Ghana's main urban areas of Accra, Kumasi, Takoradi, and Tema have been increasingly characterized by high property prices over the last five years. The discovery of oil in the deep waters off Ghana's coast sparked an increased interest in Ghana from the real estate sector. With Ghana's history of political stability and strong economic growth, large developers from across the world began to seek joint ventures with local developers in Ghana. The last several years have seen the undertaking of large-scale residential and commercial developments, driving the development of high-end commercial and residential properties.

The real estate market has grown by an average of around 11% yearly over the last five years; however, the majority of that has been targeting Ghana's more wealthy renters. Around 70% of the market represents the middle to lower end of the housing spectrum, resulting in a big void in the provision of affordable space for middle to low income families. The growing middle class, as well as rapid urbanization, has turned the housing industry into one of the critical developmental issues facing policymakers and with urbanization forecast at 3.5% per annum, on top of Ghana's average population growth of 2.19%, the gap in affordable housing is widening. Although the high-end market still represents healthy yields, the government is under increasing pressure to solve the problem of inadequate housing for the majority of the population.

The government is facing large questions about where to source the funding required to meet the huge demand for housing in Ghana, which is estimated at about one million units over the next 10 years. The gradual improvement in housing supply notwithstanding, the sector remains characterized by high costs of rental units and house prices and rents in urban areas are already high and expected to increase. The Ministry of Water Resources, Works and Housing believes the housing deficit stands around 1.7 million, and the average retail rent in Accra rose around 50% to between $60 to 65 per square meter from 2013 to 2015.
In a national address at the start of 2016, President John Dramani Mahama explained, “For years, the national housing deficit has continued to widen without commensurate investment to bridge it. The lack of adequate public housing has had serious effects on many families and households who have to pay exorbitant amounts in rent just to secure a place to lay their heads.”

Through both direct investments and collaboration with the private sector, the government said at the start of 2016 that it is on course to deliver over 12,500 housing units, which represents the biggest investment in this sector by any government in decades. These projects are targeting families affected by the Keta Sea Defense project, as well as military and police personnel and middle-income households.
The State Housing Company also signed a contract with an Israeli company to deliver 20,000 housing units in Ghana in March 2016. The company is a subsidiary of the Eldad Peri Group, and the deal is specifically targeting the housing deficit.

More needs to be done and the private sector is claiming that there has to be some legislative changes to encourage provision of affordable housing for this middle-lower end of the market. Some of the companies that TBY spoke to spoke of the lengthy and cumbersome procedure for formalizing land ownership and acquisition. Many are hoping for a streamlining of these processes to increase transparency as well as encourage the development of the sector.

Financial institutions are already looking increasingly supportive, with some providing financial vehicles to assist people onto the housing market. There is the ambition to help the informal labor force, which makes up 80% of the market, get onto the housing market. Large challenges remain in the affordable housing space, but with the government under increasing strain to provide the infrastructure for Ghana's urbanization trends, momentum is gathering.