Despite oil revenues, Ghana’s economy is in dire straits but you would not guess this from the volume of construction going on in the major cities. Developers are pumping in vast sums into prestige projects but who will occupy all the new buildings now going up? Eric Kwame Amesimeku writes that those who need housing cannot afford it and those who can are too few in number to support the building boom.
If there is one thing I’ve learnt from my 40 years working in the city, it is that house prices can never keep rising,” an investment banker character in popular British TV satirical show, Bremner, Bird and Fortune says with heavy irony. “Except this time, we thought it would,” comes the punch line shortly afterwards.
Though that particular tongue in cheek observation was in relation to the sub-prime antics that ultimately led to the financial catastrophe of 2008, he may well have been commenting about the Ghanaian housing market.
As a newish member of the lower-middle-income class, buoyed largely by activities in the extractive and, to a lesser
extent, financial and other services, Ghana is a classic example of that oft-quoted phenomenon – the paradox of plenty.
While many speak of a rising middle class, the truth is that it is a narrow demographic. While ostentatious from their consumption habits, their numbers – or the lack of it – limit their power. So while the raw data may give an impression of growing wealth, in reality it is concentrated in a few hands. Not all of which are indigenous hands.
For developers in Ghana’s frenetic real estate sector, much weight has been given to the raw data. In the wake of the country’s discovery of oil in commercial quantities, much was made of the coming boom. Wealth was expected to be made and displayed by indigenes and expatriates alike.
Naturally, investment flowed into projects to meet the demands of the newly minted. They would need places of leisure, places to conduct their high-value businesses from and of course, places of residence to match their new affluence.
In fact, Ghana’s real estate sector’s affinity to high-end projects predates its status as an oil exporter. In a sector in which the public has all but deserted its role, the private sector has found itself nearly completely in charge. While this role can be lucrative, it is not without its challenges. Land is expensive and fraught with acquisition complications.
Finance is even more difficult to obtain. When it is available, interest is high and patience is low. For many developers, thus, high-end projects are the best way to justify the costs and recoup their monies quickly enough to pay back financiers and invest in new projects. To such developers, the promise of new, oil-backed wealth must have seemed a god-send.
Another group of people that was excited by the coming joys was the landowners. In Accra, the capital, players in the sector spoke of 1:1 – a million dollars for an acre of land in the prime areas.
While more cautious minds might find this extraordinarily high for a developing country, developers, some backed and/led by foreign interests from countries like Nigeria, felt that it was worth it to get in ahead of others.
In Takoradi, capital of the Western Region on the shores of which the oil discovery had been made, landlords were also taking note. Long-term tenants suddenly found themselves unable to get renewal on their leases; even institutional tenants were sent packing as landlords readied themselves – and their properties – for more liquid suitors.
The good times were here. And luckily for landlords, they have lasted, more or less.
Even though the market is thought to have slowed post-2008, prices have largely held. Landlords have not had to take much of a cut and investors and developers have continued to pursue high-end projects.
Kwaasi Djin, a lawyer in Accra who often represents investors in land purchases, thinks that the market is only responding to the forces.
“Interest in land, especially in the prime areas in Accra, is still quite high,” he says.
But not everyone is enthused.
Michael Agyekum, a sales and letting agent also in Accra, is concerned that developers may be overestimating the scale of demand. “Demand is not what it used to be. Many of the high-end properties have less than optimum occupancy. There are too many providers crammed into that space, attempting to provide for, if you really think about it, a very small group of potential buyers,” he says.