Real Estate Research firm, Housing Data Centre is questioning government?s definition of affordable housing after its new survey revealed about 85 percent of Ghanaians cannot afford to buy a house.
The survey found that worsening economic conditions have shot up prices of homes with workers earning salaries below four thousand cedis unable to buy a one bedroom house on the outskirts of Accra.
According to the report, during the first quarter of 2014, housing prices experienced an overall hike of between 18.5% and 25%.
A year ago in the Dawhenya District of Tema, a two bedroom semi-detached and three bedroom-detached houses were sold for USD 66,500 and USD 87,000 as compared with the first quarter of 2014, selling at USD85, 000 and USD 105,000.00 – an increase of 23.5% and 19% respectively.
Again, in the Kasoa area of the Central Region, a two bedroom semi-detached and a three bedroom detached houses which went for USD35,000 and USD 55,000? during the first quarter of 2013, were being sold for USD 42,000 and USD 66,000 respectively in the first quarter of 2014.
Clearly, access to a decent residential housing property in Ghana is gradually and on daily basis becoming more and more difficult for the average Ghanaian worker.
This, according to the research firm, is largely due to the tough economic conditions emanating from the apparent lack of direction from government in managing the various aspects of the economy especially the depreciation of the local currency and the introduction of the 17.5% VAT on the Real Estate.
Source: ?Joy Business
Below is the full report
RESIDENTIAL HOUSES NOW 25% COSTLIER IN 2014 Q1 THAN IT WAS 2013 Q1: HOUSINDATA GHANA LIMITED
The recent economic trend in the country has affected the housing market with each passing month, houses becoming so unaffordable and expensive for the ordinary Ghanaian. Prices of houses, which started soaring in the year 2013, have continued during the first quarter of 2014. During the QI in 2013, a two-bedroom semi detached and a three bedroom, detached houses at Kantamanso were sold for USD 69,500 and USD 180,000 respectively as compared to Q1 2014 of USD 98,000 and USD 220,000, an increase of 23.5% and 18.5%.
In the Dawhenya District of Tema, a two bedroom semi-detached and three bedroom-detached houses were sold for USD 66,500 and USD 87,000, as compared to Q1 of 2014, of USD85, 000 and USD 105,000.00, an increase of 23.5% and 19% respectively. Again, in the Kasoa district of the Central Region, a two bedroom semi detached and a three bedroom detached houses which sold for USD35,000 and USD 55,000? during the first quarter of 2013,were being sold for USD 42,000 and USD 66,000 respectively in the Q1 of 2014.
In the Dodowa district in the Eastern Region, a two-bedroom semi detached and a three bedroom deatched which sold for USD72, 000 and USD120, 000 in the first quarter 2013, were sold for USD 90,000 and USD 150,000.00 during the first quarter of 2014. This represents an increase of 25% in the prices.
During the 1Q 2014, housing prices have experienced an overall hike of between 18.5% and 25%.? Clearly, access to a decent residential housing property in Ghana is gradually and on daily basis is becoming more and more difficult for the average Ghanaian worker. Essentially, this has been due to tough economic conditions emanating from the apparent lack of direction and leadership from government in managing the various aspects of the economy especially the speedily depreciation of the local currency and the introduction of the 17.5% VAT on the Real Estate.
Even though, the prospect within the housing market is notable when compared to other sectors, the cost pressure caused by rapid and uncontrollable depreciation of our national currency, fuel prices with its attendant increases in general goods and services, labour, material and infrastructure cost, import duties, overheads, interest rates, difficulties in acquiring litigation free land, and the additional introduction of 17.5%VAT on the houses have all led to the increased cost of production, hence the soaring pricings in housing properties in the country. Simply put, it is very expensive to buy a house now in Ghana than it was during the first quarter in 2013.
With respect to purchases, it is continuously being driven by the booming young corporate executives, middle level and the high-income level earners in the Country with the bankers, telecom and insurance sectors leading the chart with an average monthly income of between GHC2, 500 to GHC 4,500 for young corporate executives, GHC5, 000 ?GHC7, 500 for the middle level Managers whiles the senior executives are earning average monthly income of GHC8, 000 and above. Whiles income earners from the banking, insurance and telecom sectors are buying houses ranging from USD70, 000 to USD 150,000 depending on the income level, civil servants and public workers mostly patronized houses ranging from USD35, 000 to USD50, 000 obviously showing the disparity in income levels between the private sector and public workers.
Unlike the Greater and Ashanti regions, house sales in the Western region are mostly patronized by the mining and oil services workers. Again, a four bedroom town house in a plush airport residential which is now going for USD600,000 and a two bedroom apartment in Osu, Accra which is also going for USD225,000 are ?mostly patronized by top line revenue earners and? expatriates, which constitutes a very negligible percentage in terms of home buyers.
Clearly, Prices in the housing sector due to the economic importance of housing have had a strong impact on consumers and investment demand. Analysis of the components of the housing prices, which determine price difference in the housing market indicate that, ?location attributes including ?housing area, proximity to public transportation and security, proximity of green areas, neighborhood, structural factors like area or suburb, plot and room sizes, type of finishing and number of bedrooms, neighborhood attributes? including the exact geographical or administrative location of the property, social and economic situation of the area as well as the aesthetic aspects or landscape of the environment are all pricing components.
On the question of affordability, whiles some home buyers consider GHC87,000-GHC130,000 ,USD 30,000-USD50,000 and USD72,000-USD250,000 as affordable, others also consider USD100,000-USD300,000,USD150,000-300,000 and GHC62,000-320,000 as also? affordable. Other buyers also saw GHC100,000-200,000.00 and GHC40,000.00 ? 60,000.00 as affordable. Admittedly, whiles there are differences in what is considered affordable by homebuyers, they all agree that affordability of a home is a function of the income a worker earns.
Unlike Ghana, Senegal has defined its social housing as costing less than USD40, 000 with the target affordable home price for social housing as between USD13, 000-22,000, with Kenya and Uganda ??defining low-income earners as earning below KES 16,000 (USD191.00) and USD85.00 respectively.
It has therefore become imperative for Government to define what constitute an affordable housing and work towards setting the minimum qualifying income that should enable the average worker purchase an affordable house.
In respect of the mortgage facilities, the mortgage market has had its own challenges making it extremely difficult for an average Ghanaian to access a facility now. During the Q1 of 2014, a worker needed the monthly repayment of GHC1,820.00 for a one bedroom? house with the qualifying income of GHC 4,000.00. Again, the monthly repayment for a two bedroom house at Kuntunse costing GHC142,000 was GHC2,872 with a qualifying income of GHC 6,000.00 whiles the monthly repayment for a three bedroom house costing GHC180,000 at Amasaman is GHC4,000 with the qualifying income of GHC 12,000.00. Sadly, about 85% of the Ghanaian workers earn below these qualifying incomes.
Clearly, consumer disposable incomes have been badly affected by the appalling economic trend in the country, making it virtually difficult for ordinary Ghanaian worker to purchase a standard 2-bedroom house. With each passing day, customers with fixed income are made worse off with the daily depreciation of the cedi, inflation, multiple taxes, fuel increases with it resultant increases in goods and services.
Clearly, the continuous poor performance of the local currency, which started last year, has led to astronomical increases in the prices of houses hence making the purchase of houses go beyond the reach of ordinary Ghanaian. The continuous high levels of interest rate, the competitive nature of the Ghanaian housing industry, high level increases in fuel and electricity prices, transport costs, the continuous depreciation of the local currency, the introduction of 17.5%VAT, the general increases in goods and services, the continuous unstable macro-economic indicators and prevailing economic hardships in the country, and lastly, the apparent lack of direction on the part of government in managing the economy will continue to provide further boost for the continuous increase in the prices of houses in the country and will also ?impact on consumers’ disposable income, hence, the difficulty ?to buy affordable houses.
It must be noted that real estate developers in the country already pay VAT on all their materials used in the construction of houses and so the additional introduction of 17.5% on the completed houses at the point of sale has further compounded the prices of houses and has the tendency to push some of these real estate developers out of business. Sadly, if the introduction of additional VAT of 17.5% and the daily depreciation of the currency continuous, there will be a further review of prices by the end of second quarter in 2014.
The CEDI is likely to remain sensitive to both domestic and global developments and the negative knock-on effect on houses and properties prices will continue. Clearly, the effect of the exchange rate has substantially reflected in house sales.
In spite of all these difficulties, there appears to be strong sign of the housing market as evidenced by the entry of numerous new real estate companies. As the cities grow outwards, new places like Amasaman, Oyarifa, Prampram, Dawhenya, Apowa Township in the Ahanta west of the western region, Anwiakwanta in Kumasi,Nsawam in the eastern region, which hitherto were not prime areas, are gradually becoming expensive places to live.
