Latest News

HousingWed, 18 Aug, 21

How Does Mortgage Market Affect Housing Provision?

How Does Mortgage Market Affect Housing Provision?

Housing is usually the largest expenditure of a family’s budget. Ghana’s housing market is underdeveloped and owning a house is a prime aim to many. The housing market has the potential of becoming an engine of economic growth if appropriate measures are taken into considerations.                                     

There are various factors that affects the mortgage market in respect to housing provision. These factors include;

Interest Rates: Interest rates also have a major impact on the real estate markets. If you're considering buying a home with a mortgage it is beneficial to research interest rates using a mortgage calculator. Changes in interest rates can greatly influence a person's ability to purchase a residential property. That is because the lower interest rates go, the lower the cost to obtain a mortgage to buy a home will be, which creates a higher demand for real estate, which again pushes prices up.

It's important to note that as interest rates rises, the cost to obtain a mortgage increase, thus lowering demand and prices of real estate. However, when looking at the impact of interest rates on an equity investment such as a real estate investment trust (REIT), rather than on residential real estate, the relationship can be thought of as similar to a bond's relationship with interest rates. When interest rates decline, the value of a bond goes up because its coupon rate becomes more desirable, and when interest rates increase, the value of bonds decreases. Similarly, when the interest rate decreases in the market, REITs' high yields become more attractive and their value goes up. When interest rates increase, the yield on a REIT becomes less attractive and it pushes their value down.

Demographic of a Nation: Demographics are the data that describes the composition of a population, such as age, race, gender, income, migration patterns, and population growth. These statistics are often overlooked but significant factor that affects how real estate is priced and what types of properties are in demand. Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades.

For example, the baby boomers who were born between 1945 and 1964 are an example of a demographic trend with the potential to significantly influence the real estate market. The transition of these baby boomers to retirement is one of the more interesting generational trends in the last century, and the retirement of these baby boomers, which began back in 2010, is bound to be noticed in the market for decades to come.

There are numerous ways this type of demographic shift can affect the real estate market, but for an investor, some key questions to ask might be: i) How would this affect the demand for second homes in popular vacation areas as more people start to retire? Or ii) How would this affect the demand for larger homes if incomes are smaller and the children have all moved out? These and other questions can help investors narrow down the type and location of potentially desirable real estate investments long before the trend has started.

The Economy: Another key factor that affects the value of real estate is the overall health of the economy. This is generally measured by economic indicators such as the GDP, employment data, manufacturing activity, the prices of goods, etc. Broadly speaking, when the economy is sluggish, so is real estate. However, the cycle of the economy can have varying effects on different types of real estate. For example, if a REIT has a larger percentage of its investments in hotels, it would typically be more affected by an economic downturn than a REIT that had invested in office buildings. Hotels are a form of property that is very sensitive to economic activity due to the type of lease structure inherent in the business. Renting a hotel room can be thought of as a form of short-term lease that can be easily avoided by hotel customers should the economy be doing poorly. On the other hand, office tenants generally have longer-term leases that can't be changed in the middle of an economic downturn. Thus, although you should be aware of the part of the cycle the economy is in, you should also be conscious of the real estate property's sensitivity to the economic cycle.

Government Policies/Subsidies

Legislation is also another factor that can have a sizable impact on property demand and prices. Tax credits, deductions, and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Being aware of current government incentives can help you determine changes in supply and demand and identify potentially false trends.

For example, in 2009, the U.S. government introduced a first-time homebuyer's tax credit to homeowners in an attempt to jump-start home sales in a sluggish economy (only those who purchased homes between 2008-2010 were eligible). According to the Government Accountability Office, 2.3 million people took advantage of the tax incentive. This was quite a sizable increase, although temporary, and without knowing the increase was a result of the tax incentive, you may have ended up concluding that the demand for housing was going up based on other factors.

 

 

Source: Reuben Affum-Ankamah(Real Estate Times Africa)

Welcome, Today is Fri, 29 Mar, 2024

Latest Publication

 The Market

  • Bank

  • Rate

  • Tenure

  • Ecobank

  • 23%

  • Fidelity Bank

  • 22%

  • First National Bank

  • 23%

  • Republic Bank

  • 22%

  • 10yrs

  • Stanbic Bank

  • 20.30%

  • Cement

  • Weight

  • Price

  • Cimaf

  • 50kg

  • GHS 47.00

  • Dangote

  • 50kg

  • GHS 50.00

  • Diamond

  • 50kg

  • GHS 48.00

  • Ghacem

  • 50kg

  • GHS 50.00

  • Pozzolana

  • 50kg

  • GHS 47.00

  • Safe

  • 50kg

  • GHS 47.00

  • Supacem

  • 50kg

  • GHS 47.00

  • Currency

  • Buying

  • Selling

  • GHS - EUR

  • 7.7430

  • 8.2360

  • GHS - GBP

  • 9.1678

  • 9.7446

  • GHS - NGN

  • 70.4182

  • 70.4370

  • GHS - USD

  • 7.0500

  • 7.4500

  • GHS - ZAR

  • 0.4608

  • 0.5068

  • Current

  • Year Ago

  • GDP Growth Rate

  • 4.64%

  • 0.88%

  • Ghana Reference Rate

  • 14.50%

  • 15.50%

  • Inflation

  • 8.97%

  • 9.87%

  • Policy Rate

  • 13.50%

  • 14.50%

  • T-Bill (182 days)

  • 12.4316%

  • 13.2555%

  • T-Bill (364 days)

  • 13.8773%

  • 16.1134%

  • T-Bill (91 days)

  • 12.6100%

  • 12.4701%

Videos

Opinion

Partners

Feedback Form

We would like to hear from you.
Top