Editor’s note: This article was featured in Ventures Africa magazine’s June/July issue
VENTURES AFRICA – In its Ghana Housing Profile, the UN Human Settlement Programme (UN-Habitat) forecast that Ghana will need an additional two million housing units by the beginning of 2020. With hundreds of billions of dollars to be made through various projects in the country’s capital, Accra, as well as the city of Kumasi, real estate developers are chomping at the bit to get in on the action.
The Current Situation
The Hong Kong Trade Development Council (HKTDC) in mid-2012 wrote that Ghana was experiencing a property boom. It said that the rising level of per capita GDP and the growing number of white-collar expatriates continued to draw a number of developers to the higher end of the market, while gated communities were proliferating in the wealthier neighbourhoods. Though the IMF still labels Ghana as a low-income, heavily indebted poor country, in 2012, Ghana’s per capita GDP was estimated at $3,300, up 17.9 percent in two years. The real GDP growth rate year-over-year was estimated at 8.2 percent for 2012. This was behind other members of the Economic Community Of West African States (ECOWAS), including Sierra Leone and Liberia but slightly ahead of C.te d’Ivoire. Ghanaian President John Dramani Mahama’s stable democratic transition to power in mid-2012 has done well to buoy the country’s growth.
According to the World Bank, for a population that has now surpassed 25 million, one-third of which is aged between 25 and 54 years, more people means a need for more houses. With an average of 565,000 people being added to the population each year since 2008, and close to 40 percent between the ages of 0 and 14 years, the near future holds an even greater demand for housing.
Published in May 2012, the Population & Housing Census revealed that more than 90 percent of Greater Accra was urbanised. More than 60 percent of Ashanti, which includes its capital city, Kumasi, fell into the same category. Notwithstanding, the ratio of houses in rural areas to urban areas is 58:42, despite the significant migration of residents from rural to urban areas.
The wealthiest one percent of Ghanaians are looking for homes in the upmarket suburbs of Accra, Kumasi and in the northern region city of Tamale, as well as expanding their real estate portfolios by adding investment properties. Demand is also increasing for an emerging middle class, those who are able to obtain a mortgage. Securing a mortgage is a major obstacle for residential purchases simply because Ghanaians cannot pay brokers the large deposits required. This indirectly affects the acceleration of growth and stability across the sector. Still, the general improvement in Ghana’s economic situation means more people have been able to purchase first homes.
Ghana’s Construction Industry
According to the Ghana Statistical Survey of September 2012, Ghana’s construction sector accounts for a provisional 10.9 percent of the country’s GDP. In 2011, this figure was 9.2 percent. A burgeoning construction sector should cause a surge in the number of contractors vying for bids within Ghana and, more specifically, in the Greater Accra and Ashanti regions. According to the Oxford Business Group (OBG), this is due in part to the significant potential in the Ghanaian market, with energy, access to capital and industrial diversification for those within the sector plenty of reasons to remain optimistic.
In their paper, entitled ‘Delays in building construction projects in Ghana’, published in 2010 in the Australasian Journal of Construction Economics and Building, Frank Fugar and Adwoa Agyakwah ‐ Baah (members at the College of Architecture and Planning in the Building Technology department at Ghana’s Kwame Nkrumah University of Science and Technology) argue that construction delay is a common problem in Ghana. The pair posits that the reasons for construction delay include the relationship between supplier, contractor, client and consultant, as well as government action, among other things.
When asked about the relative importance of the cause of construction delays in Ghana, contractors, clients and consultants ranked “Delays in honouring payment certificates” first, followed by “underestimation of cost of projects” and “underestimation of complexity of projects” second and third respectively. Fugar and Agyakwah‐Baah concluded that money played a major role in the construction process in Ghana, a sentiment with which the OBG agrees: “The difficulty of financing and managing cash flows remains a key consideration in the Ghanaian market.”
Current and Future Developments
Dream Realty, a joint venture between the Lebanon-based Jamil Ibrahim Establishment and Ghana’s Interplast Limited, specialises in building high-end retail and office spaces within Accra’s urban centre. Developers at Dream Realty are of the opinion that, because of the absence of competitive, big-name players in the contracting industry, profits for developments can reach in excess of 40 percent above cost (for projects that are in excess of 50,000 square metres).
Dream Realty’s current and future projects include the beachfront Riviera development, the Octagon and Fort S.o Jago da Mina. The beachfront Riviera project, located in close proximity to Accra High Street, comprises twin 17-storey buildings, complementing a five-star, 80-roomed hotel. The project should be completed by end 2013. Directly across the street, alongside the Novotel Accra City Centre and M.venpick Ambassador Hotel Accra, is the Octagon, which will soon be selling office suites and 6,500 square metres of retail space. In 2014, Fort S.o Jago da Mina, which celebrated its 350th anniversary in 2012, will receive a much-needed facelift at Elmina, a popular tourist destination.
According to the OBG’s latest report, entitled The Report: Ghana 2012, there are plans afoot to build a new city near Cape Three Points, a small peninsula in the western region of Ghana, located between the coastal towns of Dixcove and
Princes Town. In late December 2012, the Ghana National Petroleum Corporation (GNPC) encountered 75 metres of oil pay (75 metres in length, the actual amount of oil found). The find is significant because there is now immense potential for rapid real estate development in this southernmost point of the country, along the Gulf of Guinea. Said the OBG report: “Cape Three Points [is] one of the closest towns to the offshore oil and gas fields and would include higher-end residential and business properties, manufacturing zones and sport and tourism facilities. While the Western Region and the high volume segment of the market may be expected to provide the greatest amount of work, there should also be increasing opportunities for contractors and developers in less volume-driven, higher-value projects in Accra and elsewhere.”
Fortunate for Ghana’s real estate sector is the Mahama government’s vocal support for creating a strong legal environment for building and in being friendly to the prospect of project tenders, both critical for a country whose supply and demand gap remains vast.