Saasepedia

Author: Makafui Kuffo

For the past few months, businesses, governments and organisations have had to re-strategize in a manner that anyone could barely anticipate. Like every other country in the world, Ghana suffered the effect of the global pandemic.  The prices of major commodities declined unexpectedly and there was a decline in trade volumes. At the peak of the pandemic, Ghana’s GDP growth declined substantially. In fact, Ghana recorded the largest decline in GDP growth since 2016 in the year 2020. Obviously, Ghana’s economy was hardly hit by the pandemic.  With several interventions such as lock-down, restrictions on international travels, and the development of vaccines, the world is nearing an era known as the post-covid era where it has become important that various economies find means of recovering. Similarly, certain sectors of the real estate market are in their recovery stages. While most people are very optimistic about the quick bounce-back of the real estate sector, there still remain some fears of investing in real estate in Accra. In this article, I have weighed the fears of investing in real estate against the opportunities of real estate investments for some key sectors of real estate.

Residential Real Estate

The impact of the pandemic varied across the two residential sectors – the sales market and the rental market. While the sales market recorded less transactions during the pandemic, the high-end residential markets which are dominated mainly by expats and diplomats suffered the most. Many expats and diplomats went back to their countries during the peak of the pandemic mainly because of the possibility of working from home leading to high vacancies in high-end residential real estate. Aside all of these, the residential market has shown signs of quick recovery as the government keeps easing restrictions, with both sales and rental transactions picking up. There’s also a new demand for home offices, as working from home has become a common practice. Although this may not reflect in the supply of residential real estate in the short term, this is foreseen to be a common feature in the supply of residential real estate in the post-covid era.

Offices

In Ghana, whereas most offices in other parts of the world resorted to working from home at the peak of the pandemic, the common practice has been to alternate between working in the office and working from home. Nearing the post-covid era, the running of shifts is gradually fading out at most work places. Despite this, there still remain a good percentage of office tenants who have devised means of effectively working from home. This has the possibility of causing a decline in office rents and occupancy rates – one that would barely reverse to the situation before the pandemic. Prime office rents have reduced substantially over the past few months.

Retail

The effect of the pandemic has seen an improvement in online retail platforms. Many are still discovering the effectiveness of these online retail platforms. This has the potential of leading to a decline in the supply of retail outlets. Although the patronage of online retailers may not completely eliminate the patronage of physical retail outlets, the demand for retail would still see some effects caused by the boom in online retail.

Logistics

With a surge in online retail, logistics is gradually rising and presents prospects for growth in real estate investments. Presently, warehouse facilities have generally suffered some pressures in terms of increased demand. In view of this, innovation has become extremely important for the growth of the logistics sector for the economy of space. It is also foreseen that just as many other advanced countries are changing the existing use of distressed retail assets for logistics, Accra is likely to change the uses of many distressed real estate assets into warehouses. An increased demand for last-mile logistic facilities in areas closer to town centres is also foreseen as demand for online retail increases.

Hospitality

The hospitality sector suffered the most from lockdown restrictions and the restrictions on international travels. Although, some hotels served as isolation centres, the sector suffered a lot from the pandemic. With the present easing of restrictions on international travels, the sector has begun to see some patronage. However, recovery is gradual for most aspects of the hospitality sector. Many investors are still skeptical of investing in hospitality.

Healthcare

The healthcare sector is increasingly becoming a centre of attraction for many real estate investors as there has been the need for the development of the healthcare sector to ensure the delivery of quality healthcare services. The pandemic has brought out the defects of the healthcare sector and the need to increase the supply of real estate assets in the sector.

Data Centres

The need to go digital in the workplace has been reinforced by the effects of the pandemic leading to the need to move IT workloads to the cloud. Digital services have become very important due to the growth in the need for remote working tools. There is a new dimension of demand in data centres as the need has risen for the localization of data centres. This coupled with the digital Ghana agenda has made it necessary for data centres to be located in Ghana.

Indeed, although the pandemic has led to a decline in certain sectors of the real estate market, it has also opened up new opportunities for investing in real estate.

About the Author:

Author: Albert Ahiadu

Housing is often too expensive for the average household to purchase outright. In developing countries like Ghana, people often resort to mortgages, informal loans, housing associations, incremental housing or simply renting. Regardless of the preferred method, it is important to keep track of how much is spent because it is usually the priciest expense. Factors such as household size, housing benefits, regional variances (differences in housing cost because of the location) and quality of housing all complicate affordability, but these are a few of the measures popular around the world.

• Rent-to-income ratio

This measure is most significant for renters, and simply involves viewing rent in proportion to income. This percentage informs on how much is being spend on housing as well as other expenses. Traditionally, spending no more than 30% of gross income on housing is deemed affordable.

• Housing price-to-income ratio

Another popular gauge of affordability is the ‘housing price-to-income ratio’. This ratio captures how many years of a household’s annual salary can pay for housing, highlighting how long a family can expect to pay off housing if they choose to either build themselves or take a mortgage facility. The UN estimates that the ratio is approximately 2.5 in developed economies, but can be as high as 10 in Ghana, a developing country.

Affordability is a bigger socio-economic issue for poorer families because they generally have less disposable income to spare. Consequently, spending too much on housing will inevitably leave these with less money to spend on other essential expenses – food, utilities, transport, education for the children, savings and planning for retirement. Most households in Ghana do not consciously keep track of how much they spend on housing, but the implications of it demand attention and requires you to ask; am I spending too much on housing?

About the Author

Author: Robert Nutifafa Arku

The submission of a group project report on a research study undertaken is a milestone in attaining a bachelor’s degree from the University of Science and Technology in Kumasi, Ghana. My preference was to explore topics relating to housing issues (e.g., housing deficits) in Ghana.  However, the team leader, Eunice, had her ideas – Examining the concept of Green Buildings in Ghana.

The rest of the team – Claudette, Tracy, Fiifi and I – were a little hesitant as this topic was quite new to us. She, however, succeeded in bullying motivating us so much that we all finally agreed to explore the topic. This was a great learning experience, as I was exposed to how various real estate development and related processes can be used as a tool to attain environmental sustainability.

Financing is an important tool in real estate development and processes. There has been recent interest in using this tool to advance the goals of environmental sustainability, globally (especially in China). This is termed as Green Financing.

Green Financing in real estate is a structured financial activity (e.g., loans, debt mechanisms, investments, etc.) geared towards funding real estate projects with ‘green’ or environmental benefits. Such projects relating to environmental protection and sustainable development include renewable energy, energy efficiency, clean transportation, green buildings, and green technologies.

This financing mechanism can be pursued to achieve the United Nation’s 2030 Agenda for Sustainable Development Goals (SDGs), including goals #6, #7, #11, #13 and #15.

The built environment is an integral part of the natural environment. It is therefore important that human activities and projects are carried out using environmentally-friendly and safe practices to ensure better environmental outcomes.

This article is the first of a series on sustainable (green) real estate investing. Stay connected as we bring you more insights on the subject of green financing.

About the Author:

Robert Nutifafa Arku

Housing is expensive and the most tasking singular expense many households ever bear. As such, most people who are unable to afford outright purchase resort to any of the following – mortgages, incremental housing, housing associations, informal loans and crowdfunding.  

For the average Ghanaian, mortgages represent an alternative that is far too expensive and impractical, considering the down payments and high interest rate. However, there are also several socio-economic biases that motivate Ghanaians to avoid them:

• Social stigma towards debt

Many Ghanaians have some level of apprehension towards the use of debt, particularly for an undertaking as significant as constructing one’s home. In contemporary times, most people determine their personal worth by their financial standing, and being in debt is seen as the very opposite of financial worth. This view is shared by well over 60% of individuals interviewed, and represents the most significant reason beyond the high interest rates. This bias seems to be a bigger issue for men than it is for women, with 26% more men stating this reason. This aversion towards debt particularly by the males may be attributable to the trite sentiment that ‘the man provides’.

• Fear of losing one’s home to foreclosure

Possibly influenced by the large number of foreclosures in the aftermath of the financial crisis in 2007, the fear of foreclosures has been etched in the psyche of many homeowners. About 57% of respondents highlighted a fear of foreclosures, regardless of the fact that the banks insist they have not completed any such measures between 2013 and 2017. 

• Distrust of financial institutions

Particularly in developing economies such as Ghana, there exists mutual suspicion between people and the financial institutions. This is as a result of common belief that the banks ‘are out to get them’, and this belief discourages a number of prospective home owners from exploring mortgages as a financing option. Just shy of 1 in 2 people consider this reason significant, a distrust that seems more pronounced with higher amounts of money. 

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