BEYOND THE SKYLINE

Ghana 2016 | CONSTRUCTION & REAL ESTATE | REVIEW: REAL ESTATE

Ghana has experienced rapid urbanization, with people flocking to the cities in search of a higher standard of living.

Over the last three decades, the number of people living in Ghana's urban areas has more than tripled, rising from 4 million to nearly 14 million. Today, 54% of Ghanaians live in cities, and between 2010 and 2015 this figure grew by 3.4%, according to the CIA's World Factbook. Interestingly, Ghana's urban population growth has been faster in its smaller cities than its larger ones.

Although these urbanization figures have been beneficial with a strong correlation between per capita income and urbanization, this has had some more unpleasant side effects including congestion, unregulated urban expansion, and a decreasing access to affordable quality housing.

The Ghanaian property market experienced a boom with the liberalization of the financial sector in the early 1990s, but the real estate market has grown in a disjointed and fragmented manner.

The Ghana Real Estate Developers Association (GREDA) is a centralized organization, and represents its members to the government. Its main aim is to increase housing stock and, in 2012, the government agreed with the GREDA that it would increase public and private collaboration, in particular to meet the needs of the lower-end of the market. However, over the years, the general concentration has been toward the middle and top ends of the market, leading to a shortage of affordable housing in the country.

The investment opportunities are large, and have been for some time, especially because Ghana is welcoming of investment, with freely transferable capital and profits. Over the years, investors have taken advantage and developed not only high-end residential projects, but industrial and retail space, too.

Accra and Tema are the areas that have seen the biggest real estate projects. In the 1960s, following independence, as part of the National Development Plan, the provision of housing was prioritized, and two main state bodies were formed; the State Housing Corporation (SHC) and the Tema Development Corporation (TDC). The TDC was tasked with creating special-purpose residential units in the rapidly industrializing Tema region alongside the construction of a second seaport to serve the nearby capital and eastern regions. The SHC, in contrast, worked in all of Ghana's regions, providing real estate countrywide. Since then, due to the disjointed nature of the real estate market sector, the supply of real estate has been fragmented.

Today, the Accra and Tema Metropolitan Areas account for around 70% of total property developers in the country. The most expensive area in Accra is the Airport Residential Area, and in 2014 the average house prices were GHS950,000 ($262,250). Other expensive areas in the capital include East Legon, at GHS800,000 ($220,842) and Spintex, at GHS600,000 ($652,632).

In the rest of Ghana, house prices remained cheap, at an average of GHS280,000 ($77,295) over the same period. In Kumasi, the average price of a house stood at GHS220,000 ($60,732) in mid-2013. In Sekondi-Takoradi, the average house price was GHS180,000 ($49,690) over the same period. Cape Coast has the least expensive houses in Ghana, at an average of GHS120,000 ($33,126).

Airport City in Accra is the area that has most benefited from the amount of investment dollars, from both local and foreign sources. It is a great testament to the amount of money that has been pouring into real estate development in Accra.

The skyline has changed at a dizzying speed with construction projects taking off at a rate unseen in the country. Marina Mall, a shopping mall and office complex owned by the Marina Group of Burkina Faso, is in an area strategically located near the airport, with office and retail space. There is also Icon House in the same area, completed by South Africa's RMB Westport and anchored by Stanbic Bank. Today, the mixed-use property houses some of Accra's biggest names, with 8 floors of A-grade offices, each 15,080sqm and a ground floor retail space of 2,537sqm.

Opposite Icon House is the Laurus-developed One Airport Square, an iconic building and the first certified eco-friendly building in the city. It is a mixed-use office and retail space, with a total size of 20,000sqm. And adjoining that is Nester Square, another mixed-use office tower and retail development being constructed by DeSimone. With other projects, such as the Atlantic Tower and the African Sun Hotel, all moving into the area, it seems like the old mantra of build it and they will come has been driving Airport City's rapid development.
The older part of the city, Osu, has also seen some rapid developments, with an 120-unit apartment complex called Chateau Towers, by Hollywood International Developers, currently close to completion. This is just walking distance from the 13-storey shopping mall and hotel complex on Oxford Street, The Oxford Street Mall, whose anchor tenant is Shoprite, a supermarket brand from South Africa.

Not to be outdone, the Central Business District of Accra is also expecting construction activity. Already, the 13-story Octagon Business Center, built upon a local market, is another ambitious mixed-use project by Dream Realty with a 200 hotel room block, 13 floors of office space, five floors of parking space, a food court, five cinema theaters, and space for clinics, banks, and world-class tenants.

One problem that is now facing these shiny new buildings is finding tenants. Historically, Ghana was always seen as the logical location for multinationals to host regional offices, with the likes of Nestlé, Coca-Cola, and Unilever all operating from Ghana's safe borders. However, with Nigeria becoming the largest economy on the continent and Cote D'Ivoire likewise booming, when Ghana started to experience macroeconomic difficulty, many investors began eyeing up other options. Although demand for retail space is not dwindling, many real estate players are expecting that investors will be disappointed as office spaces are let for less than the projected price.

On the other hand, as much as these developments have revolutionized the skyline of Accra, they have not targeted public and private collaboration to meet the needs of the lower end of the market. The demand for middle-income and low-end residential real estate is extraordinarily high, and supply in this sector is short because of the lack of construction financing for such projects. “Build-on-request" is a common practice, with houses only being built when a potential buyer has been identified, and the construction is done on an installment payment basis.

This is the area where foreign investor participation is most needed. In President John Dramani Mahama's State of the Nation address, the government recognized that more has to be done to meet the housing deficit of 1.7 million housing units.

In terms of the players who are specifically targeting this section of the market, Regimmanuel Gray Ltd, RSS Developers, and Devtraco are pushing to fill this demand. The government has opened its arms to welcome foreign investors, with huge concessions and ample evidence of open-door policy to attract foreign capital.
The public sector is taking advice from financiers and mortgage providers on how to deepen the mortgage market in Ghana in order to support housing delivery. Looking ahead the population is growing and with rising per capita incomes a more sustainable model for providing housing units is needed.