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HousingMon, 10 Jan, 22

What to Expect From Ghana’s Housing Market In 2022

What to Expect From Ghana’s Housing Market In 2022

Ghana’s housing market ended the year 2021 on a positive note despite the adverse effects of the COVID-19 pandemic on the world’s economy. While the pandemic brought several sectors of the economy to their knees, the housing market saw off 2021 heads up. The residential space market was in high supply, countering the demand factors surrounding the real estate market in the country.

The country led the rest of Africa in high mortgage lending rates in 2021, with an encouraging market for housing. The cost of mortgage finance, measured by the prevailing mortgage lending rate in Ghana, was revealed to be one of the highest in Africa, outpacing the country’s real estate and economic peers such as South Africa, Kenya, Nigeria, Botswana, Mauritius, and Egypt, among others.

Residential real estate developers enjoyed a booming market despite the new COVID-19 variant and its attendant impact on businesses.

The housing market in Ghana is being catalysed by expatriates and Ghanaians in the diaspora, bypassing the aggressive lending rate cuts. The residential market, according to industry players, received more lettings than sales. The housing market also had a push from first-time buyers and a fraction of repeat buyers, as more housing projects were being put up, reflecting the interest of Ghanaians in buying houses.

2021 was seen as a buyers’ market because supply seems to be greater than home seekers who have an interest in buying. This situation gives home buyers leverage over sellers because when supply is higher and demand is lower, the market is forced to respond in order to form equilibrium.

Going forward, in 2022, the housing market is expected to get a boost from government policies and other factors to change the trends in the market.

Government policies to support housing affordability

The government of Ghana is actively putting together policies to help make housing more affordable for its citizens. It is interesting to note that only 5% of Ghanaians can own homes without government assistance. The rest of the population will need some form of assistance from the government to be able to own homes in the country. The following are some of the policies the government will use to cushion affordable housing delivery in 2022.

The cost of construction 

In an effort to reduce the housing deficit in the country, the government is working on a framework that will absorb the cost of land and infrastructural services, which are key components in the provision of decent, secure, quality, and affordable accommodation for private developers in support of its affordable housing programme. 

With the high price of most commercial housing units being attributed to the cost of building materials, which are mainly imported, the government urged industry players to embrace the use of local building materials because, for housing to be deemed affordable, housing costs should not exceed 30% of a household’s income, be it for purchase, mortgage, rental, or rent-to-own.

Pension Funds to Support Mortgage

The government has observed that the need to provide access to housing for Ghanaians requires putting in place sustainable policies and programs aimed at ensuring that the issue of affordable housing no longer becomes a myth, but a possibility. Because of this, the government is exploring the possibility of prospective homebuyers using their Tier 2 and 3 pension funds as the initial deposit to support their mortgage plans.

Rent-to-Own Scheme

The Government of Ghana intends to improve on the National Housing and Mortgage Fund (NHMF), which looks at the National Mortgage Scheme and Affordable Housing (Rent-To-Own). The rent-to-own scheme is designed to eliminate the burden of the two-year advance system and give low-income earners the opportunity to rent and eventually own homes, with a focus on semi-detach and detached apartments across the country. 

Lending interest rates

Interest rates will likely be moving lower this year because high interest rates are the main reason homebuyers lose interest in purchasing homes. Last year, the cost of borrowing was very high in Ghana, placing the nation among countries in Sub-Saharan Africa with expensive mortgage lending rates. 

The president of Ghana, Nana Akufo Addo, charged the newly constituted board of the Bank of Ghana to work around the clock and bring down the cost of credit in the country.

"It is surely not right that the Central Bank’s monetary policy rate stands at 13.5%, whilst commercial banks lend to the private sector at rates of 21% and above. This is a gap we have to breach if we are to realize the vision of Ghana, whose economy is globally competitive. I believe the Bank of Ghana is the best place to lead this process of reflection and action, "the President said.

Are people looking to rent or buy in 2022?

The housing market experienced a shift from buying to renting and peaked in 2021 against players' expectations of more sales, a lesson industry players will be guided by this year.

Accra is the mother of real estate in Ghana since most of the real estate businesses are centered there and people who move into Accra to work are more likely to rent than buy homes. Accra remains optimistic regarding the country’s residential property market, which is expected to remain active as the long-term appeal of this sector holds strong.

Service apartments are being converted to offices 

By the third quarter of 2021, some service apartments were being converted to offices because of a sudden demand for office space within the localities. The developers believe that there was a sharp decline in the demand for service apartments attached to commercial buildings and were forced to put the service apartments on hold and convert them into offices.

 

Source: Abdul-Razak Mohammed (Real Estate Times Africa)

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