Ghana’s Real Estate Sector faces dire crisis – GREDA President

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The President of the Ghana Real Estate Development Association (GREDA), Mr. Patrick Ebo Bonful, has issued a grave warning about the current state of Ghana’s real estate sector.

Despite its significant growth over the past two decades, the sector now finds itself grappling with unprecedented challenges amid an ongoing economic crisis.

Addressing the audience at the Ghana Housing Awards in the UK, Mr. Bonful revealed that despite achieving a commendable growth rate of 22% in 2020-2021, the real estate sector is now burdened by weak GDP growth, deteriorating balance of payments, high inflation, and a depreciating local currency.

“The real estate sector has played a pivotal role in Ghana’s economy in recent years,” stated Mr. Bonful, referencing a report by the Oxford Business Group.

He highlighted that in 2020, the sector contributed nearly GHS11 billion ($1.9 billion), accounting for 2.9% of the country’s GDP, compared to GHS9 billion ($1.5 billion) or 2.5% in 2019.

Despite challenges posed by the Covid-19 pandemic and global oil price fluctuations, Ghana’s real estate sector has demonstrated remarkable resilience since 2013.

However, Mr. Bonful emphasized that the current economic crisis presents a new and formidable challenge that threatens to undermine the progress made over the past two decades.

The impact of the Covid-19 pandemic varied across different sub-sectors of the real estate industry in Ghana, but overall, the sector managed to weather the storm with fewer negative consequences than anticipated and began experiencing a rebound in 2021-2022.

Nevertheless, the economic crisis has already begun to affect property prices, raising concerns.

Although it is illegal to list real estate properties in foreign currency, sale and rental prices are often quoted in US dollars.

Consequently, any depreciation of the Ghanaian Cedi leads to higher prices in local currency terms, rendering the market highly vulnerable.

The real estate sector has relied on increased activity in the mid- to high-end property markets, driven by a growing middle class, a thriving tourism sector, and corporate demand. However, a depreciating currency negatively impacts the purchasing power of all buyer classes, which is likely to impede short- to medium-term growth.

The GREDA President further highlighted the challenges in developing a mortgage sector, with the mortgage-to-GDP ratio standing at a mere 0.5% in 2020 and a virtually non-existent secondary market.

He expressed concerns about the limited mortgage sector being further diminished by the current economic crisis, characterized by high interest rates, inflation, and a depreciating currency.

This he said  would  lead to banks tightening lending requirements, demanding higher interest rates, and reducing financing, which will negatively impact both buyers’ and tenants’ demand.

Looking ahead to 2024 and beyond, Mr. Bonful predicted that Ghana’s current economic crisis will persist, with the austerity program undertaken as part of the $3 billion IMF bailout package taking its toll on the country.

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