In recent years the greater activity and growth in the real estate sector has contributed to Ghana’s continued economic expansion. Private entities own more than 70% of properties in the local residential and commercial markets, according to the report “Construction Sector – Real Estate Development Report 2022” published by Ghana’s GCB Bank in September of that year.
Demand for retail and office space has kept the commercial property market busy, with residential properties being converted into commercial office or retail space. On the residential side, the real estate market comprises land sales, and build-to-rent and build-tosell projects. Under its affordable housing initiative, the government plays an important role in supplying homes at the low end of the market. Ghana intends to utilise public-private partnerships to develop 250,000 housing units annually through to 2030.
Structure & Oversight
The Ministry of Works and Housing (MWH) oversees policy and development, having initiated affordable housing projects to address the deficit of such residences, which the Ghana Statistical Service (GSS) estimated to be 1.8m units as of 2021. The 2015 National Housing Policy is the framework for housing development, emphasising the need for engaging the private sector to bridge the housing gap. The National Housing and Mortgage Fund (NHMF) works with financial institutions to develop various mortgage products for potential homeowners.
To enhance transparency in land acquisition and ownership, the Ghana Lands Commission is tasked with registering lands and recording relevant information. The legal framework governing land and property ownership includes the Constitution of 1992 and the Land Act 2020. The latter consolidates and harmonises land ownership laws, allowing the government to more effectively manage property-related issues. This legislation also prohibits discriminatory practices concerning land held under customary tenure based on one’s ethnicity, gender, disability or social status.
Foreigners are limited when it comes to the types of interest they can hold in property in Ghana. For example, foreigners cannot be granted a freehold interest for a property, which would give them control over the building and the land upon which the building is located. Instead, they are allowed to have a leasehold interest, albeit for no more than 50 years. Notably, this rule does not apply to foreign ownership of shares in Ghanaian companies holding real estate. However, a company is no longer considered local if non-Ghanaians hold a share in the entity that exceeds 40%.
In March 2022 Parliament passed the Electronic Transfer Levy Act 2022 to maximise revenue mobilisation. The act imposed a fee of 1.5% on electronic transactions that entities are required to charge and pass on to the Ghana Revenue Authority, the administrative body responsible for collecting tax revenue. The aim of the legislation was to improve the utilisation of tax revenue, which in turn is expected to help increase transparency in the housing market. In addition, the Exemptions Act 2022, which was passed in September of that year, is expected to incentivise foreign direct investment (FDI), particularly in the residential segment. “The current global financial disruptions have shown that real estate in Ghana is a rather safe and secure investment which has room for greater FDI inflows, and offers investors an opportunity to diversify their investment to reduce exposure and risk,” Fuseina Abu, former managing director of Goldkey Properties, told OBG.
Performance & Size
Ghana’s real estate market has seen its growth fluctuate in recent years. Consistent demand for modern housing, and commercial, retail and industrial properties has fostered optimism among industry players. Sector GDP was up 8.9% in 2021 compared to the 11.7% growth observed in 2020, according to the GSS. However, the sector experienced a decline of 7.6% in 2022 as a result of the economic difficulties faced by the country that year. GCB Bank estimated the quarter-on-quarter seasonally adjusted growth rate for the sector to be 1.2% during the second quarter, up from 1% in the first quarter of the year. In comparison, the sector’s year-on-year growth rate for the second quarter of 2023 was 4.2%.
GCB Bank’s September 2022 report on real estate development stated that 90% of the market is controlled by informal market players, which mostly target the middle-class and upper-class segments. Meanwhile, inefficient urban planning, a lack of funding for affordable housing, delays in land registration and acquisition, and a growing population have led to the existing housing deficit. In response, the government expects to address these issues through collaboration with private real estate developers. “Investors in the real estate sector should spend adequate time to research and understand the market, target a segment and provide the needs to satisfy consumers, as well as invest strategically with a long-term vision in mind,” James Condua Orleans-Lindsay, CEO of JL Properties, told OBG.
The GSS’ 2021 population and housing census found that there were 10.7m structures in Ghana, with nearly 20% of them in the capital, Accra. The Greater Accra, Ashanti and Eastern regions combined accounted for nearly half of all listed buildings. Of the 10.7m buildings, more than 80% were complete, meaning they had roofs, and fixed doors and windows. The number of residential buildings in Ghana was nearly 5.9m as of 2021, up significantly from the figure of 3.4m that was recorded during the previous census in 2010.
Office Space
As of the first half of 2022 Ghana had nearly 145,000 sq metres of grade-A office space, with the average rent received by such properties ranging from $25 to $28 per sq metre per month, according to a November 2022 report from the Ghana Investment Promotion Centre. Grade-B office space monthly rents ranged from $15 to $20 per sq metre. However, GCB Bank’s 2022 report put the monthly figures per sq metre at $22 to $26 for grade-A offices and $17 to $20 for grade-B spaces, with the typical size of rented spaces ranging from 50 sq metres to 200 sq metres.
Although the informal segment accounts for the majority of retail real estate, the formal segment is seeing greater interest, including from large international players due in part to the country’s growing middle class and its greater discretionary spending. Broll estimated that in the first half of 2022 there were more than 138,000 sq metres of available retail area, with an additional 59,000 sq metres under development. The average monthly rent for such spaces ranged from $20 per sq metre, to $35 per sq metre. Although the retail market saw an uptick in demand from local retailers for such spaces during the first half of 2022, this increase was tempered by the local currency’s drop in value.
Residential Properties
Ghana is undergoing rapid urbanisation, with the number of people living in cities reaching 18.4m in 2021. This has resulted in a surge in housing demand, reflected in the rise of registered residential buildings between the 2010 and 2021 censuses. By mid-2022, the average monthly rent for a three-bedroom residence in a prime Accra residential neighbourhood ranged from $2500 to $3000, driven by increased demand for housing, subsequently elevating land costs in the city centre. The cost of land in prime residential and commercial areas in the capital can be as much as $2m per acre, according to GCB Bank, although land is much cheaper in the outskirts of the city, at prices as low as GHS85,000 ($7700). An expanding expatriate population is also driving the market for build-to-rent property in Accra.
Mortgage financing is commonly used by middle-income earners and Ghanaians in the diaspora to purchase property. At the end of the first half of 2022 a two-bedroom apartment unit in a high-end property cost between $180,000 and $300,000, while three- and four-bedroom units cost from $400,000 to $750,000.
The Ghanaian government is supporting the development of the real estate sector and has established specialised industrial zones to increase the size of its property base. In 2018 the government used GHS1bn ($91m) to establish the NHMF to offer subsidised cedi-denominated mortgages to encourage private sector players to build affordable housing.
Mortgages & Financing
Low- and middle-income households, and small businesses tend to look to microfinance institutions, and rural and community banks for loans, although government-run institutions such as the Microfinance and Small Loans Centre (MASLOC) also offer individuals and business entities micro- and small loans. However, these types of facilities are not intended specifically for buying homes, although businesses that are operating in the sector can apply for them to fund their own operations. In 2020 Ghana had $567m in outstanding residential mortgages and a mortgage debt-to-GDP ratio of 0.8%, according to the Centre for Affordable Housing Finance in Africa’s “2022 Housing Finance in Africa Report”.
Although mortgage rates in Ghana vary from bank to bank, in general, they have been rising due to macroeconomic conditions. The prevalence of mortgages remains low because of elevated commercial interest rates, low incomes and issues around the legitimacy of the collateral put up to secure funding. The high interest rates have in turn increased the number of non-performing loans. Economic conditions in Ghana have resulted in the country’s reference rate rising significantly since January 2022, when the rate was 13.9%. By the end of the year it had more than doubled to 32.8%, and the rate has continued to fluctuate throughout 2023, from a low of 25.8% in April to 32% in November.
Mortgage lenders in Ghana usually require a down payment that is equivalent to 20% of a property’s total value, according to GCB Bank. Mortgage lenders offer a range of terms, with the average term for US dollar-denominated mortgages being 15 years, while the average term for cedi-denominated mortgages is 20 years. FNB, Republic Bank, Fidelity Bank, Stanbic Bank, GCB Bank and Ecobank are Ghana’s leading mortgage lenders, while some banks offer mortgage benefits to their employees as part of their compensation packages. According to the September 2022 GCB Bank report on real estate development, FNB was the largest player in the mortgage market, accounting for roughly 50%.
Government Programmes
Under its Housing and Mortgage Fund Scheme, Ghana has implemented two programmes to boost the real estate sector: the NHMF and the Affordable Housing Real Estate Investment Trust. They address the housing deficit through demand-driven mechanisms, such as lower interest rates, and income deductions for homeownership for public workers and civil servants. These programmes are the result of the Ministry of Finance identifying the two largest barriers to homeownership as a lack of access to affordable mortgages and insufficient funds.
The NHMF’s subsidised housing loans – which are available to eligible public workers and civil servants who have been working for at least five years in their positions – are provided by three banks: GCB Bank, Stanbic Bank and Republic Bank. The mortgage rates offered are significantly lower in comparison to the average market rate, at 12% and 11.9% from Stanbic Bank and Republic Bank, respectively, compared to the nominal minimum rate of 24% for cedi-denominated loans, according to GCB Bank’s September 2022 report.
A government-recognised advocacy group focused on the country’s real estate sector is the Ghana Real Estate Developers Association (GREDA), which aims to encourage private sector participation in the industry and improve standards to attract further investment. In April 2022 local media reported that the president of GREDA had advocated for less expensive construction financing for the supply side of affordable housing, as well as an average term of 25 years for cedi-denominated mortgages with an annual interest rate of 12%.
In addition to these initiatives, the government is offering private real estate developers a five-year tax holiday to encourage them to provide low-cost, high-quality housing to low- and middle-income households (see analysis). This break allows companies operating in the sector that build certified low-income residences to pay a 1% tax on their income for the first five years after they begin operations in Ghana, albeit there are limitations. According to the MWH, the tax holiday is tailored specifically for low-cost housing developers, not those constructing luxury residences.
Outlook
Ghana’s real estate market is expected to continue expanding due to factors such as ongoing urbanisation, a growing middle class and greater foreign investment. Demand for residential and commercial properties is anticipated to remain elevated, and infrastructure development is set to boost growth.
Going forwards, the urbanisation rate will require major investment in the building of higher-density housing, mainly in Greater Accra. In the medium to long term, the commercial building segment is expected to significantly boost Ghana’s real estate offerings, supported by growth in the formal retail market, and the construction of malls and mixed-use buildings. Non-residential construction opportunities are also set to increase as the government addresses the population’s demand for health care and education services.
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