Due to the rapid changes occurring in Ghana’s real estate industry, I believe it’s become necessary to provide an insightful forecast that would assist many stakeholders in this industry to plan their future in the market.
History has taught us that due to human nature and the passage of time, we can expect changes in consumers’ taste, advancements in technology, changes in variations of demand and Soceital values, as well as people’s access to finance.
This demands that Real Estate developers embrace the constant changes in the industry to skillfully and successfully adapt to the future market without being archaic in mindset and obsolete in approach. Civil engineers, planners, building consultants, estate developers, investors, architects and property valuers are all faced with a huge task of keeping up with these changes.
Ghana currently has a social housing problem, with a deficit of 1.7 million units and a minimum of 170,000 housing units would have to be built annually (Daily Graphic online, 2014).
With this, Real Estate developers who strategize well will really flourish in the coming years especially because the government cannot achieve its annual target of constructing housing units alone. Furthermore, the country’s population will keep growing by 2.25% annually creating more housing deficit in the coming years.
In urban areas such as Accra, Kumasi and Takoradi, where parcels of land have become scarce and difficult to acquire, both apartments and condominiums will be in high demand. While there are several luxury projects underway in our cities, provision of affordable housing for the ordinary Ghanaian has remained a political talking point. Unfortunately, the shortage of affordable housing continues to be one of the most critical socioeconomic challenges facing the country (Ghana National Development Plan 2008).
There may be a boom in this market in the next five years due to the government’s efforts to remove slums and improve living standards of citizens. Private stakeholders who focus on increasing supply of low-income housing will find the investment well worth it.
Due to some socio-economic factors such the nation’s political climate, and response to the COVID-19 pandemic which included the shutdown of state borders and a partial lockdown, among others, the standard of living of citizens has been greatly affected. The Real Estate industry was among several to take a hit.
Within this period, people have lost their jobs and more job cuts are expected in the coming years. This has brought a change in buying patterns and the reduction of buying power in the industry.
With Ghana’s expected GDP growth rate set to drop drastically from 6.8% to 2.6% according to a report by Deloitte, the purchasing of landed properties will become expensive and more cumbersome for the consumer as suppliers raise prices to keep up with the economy.
In spite of this, there will be a net increase in demand for housing units in the country by 2026 and this spells good news to Real estate owners and land lords with tenants, as buyers will be at their mercy.
However, with limited disposable income to work with and a gloomy economy, real estate scores very low on buyers’ priority lists.
Under current government policy which has seen an increase in taxation on most goods and services in order to offset the cost of running welfare programs, we can expect an increment in house and rental taxes. Currently, there are two rates for rent tax; 8% for residential premises and 15% for non-residential premises.
Upcoming tax reforms by GRA will most likely reduce the financial benefits of owning a house in Ghana. By 2026 homeowners may not be enjoying tax holidays as increased rent tax, property rates, property gain tax and property sales tax will be required of them under the new tax law being established by the government. This will have a huge impact on the industry, evidence of which will be greatly felt by 2028.
Finally, due to congestion in the urban centers mentioned earlier in this article, we can also expect expansion of industrial real estate to rural Ghana. Housing demand will increase in these areas as workers in participating companies will relocate to be closer to their work places.
Other smaller retail and service businesses would pop up in these residential areas hence presenting opportunities for commercial real estate development. In the long run, this could result in mass exodus of citizens to the less congested areas as has been seen in the last two decades of communities like Kasoa, Nsawam, Dodowa and others just at the outskirts of Accra.
Furthermore from these urban centers where the capital gets crowded, movement is congested and property prices keep increasing, citizens who earn little and as such cannot keep up with the increasing costs of living, will be forced to move out to other places such as Sunyani, Ho and Koforidua.
Due to this migration, some growing real estate developers can take advantage of the situation to provide housing solutions for migrants who have left the busy capitals for more suitable environments.
Despite the Migration, buildings and housing in urban areas will remain fruitful as the over-crowding state of the capital is likely to attract more foreign and local investment.
But if developers are looking to explore areas with less competition, cheaper assets, coupled with a great potential for huge capital gains, rural Ghana is a perfect place to set up shop.
The author, Jethro Cobby is a real estate consultant.
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