Rental Market – Ghana's Untapped Potential

According to the 2007 Housing Market Report of the Bank of Ghana – "The housing market has become important and strategic for policy makers lately because of its impact on fluctuations in output and inflation. Generally speaking, activities in the housing sector can affect the well-being of a people in terms of size and composition of household wealth, accessibility to credit, labor productivity, and Employment and other macroeconomic variables. "

Despite this, one may wonder why our political leaders and decision-makers have still not given priority to housing development. The lack of attention and investment in housing is troubling. This has an impact on the development of children and young adults, the opportunity to develop business ideas or to fully exploit their potential.

Many factors must be taken into account when planning the housing needs of a city or country. One of these factors is the combination of housing. The housing combination is a mixture of the types of housing structures required. This could include apartments, individual or semi-detached family homes, bungalows and apartment buildings.

Housing needs are also influenced by household size and income levels or income profiles of the population living in the area. Smaller households may need one- or two-bedroom apartments, while larger families may need more rooms.

As indicated in February 14, 2019 publication, Ghanaian real estate developers build mainly to sell. This approach to housing supply has alienated or prevented many people from acquiring decent housing or owning a home. This article discusses the untapped market for rental housing, dominated by private owners who systematically exploit their tenants.

Although some of these houses or structures are not conducive to human habitation, the increasing migration of rural populations to cities is worsening the situation. The 2014 report of the Living Standards Survey of the Statistical Service of Ghana estimates the number of households at 6.6 million. The size of households in rural areas was (4.5) and urban (3.6). This suggests that three- to four-bedroom homes would be the most suitable for housing in both communities. With a population of just over 30 million, it can be badumed that the number of households has increased to 7 million or more.

With such a significant increase in population, it is obvious that more houses are needed. Government figures suggest that the housing deficit is 1.7 million. Even if a thousand residential properties are built in a year, it will take us more than a millennium to clear the deficit. The current strategy of building to sell does not help the situation either.

What developers have largely ignored is the rental housing market. Given the number of households in the country, any developer who focuses on building for rent is required to maximize his return on investment. Building for Lease has two advantages: a constant cash flow from monthly rental income and capital gains from badet values ​​over a period of time.

The table below gives us some indicative figures of the estimated market value of the rental housing sector. These are calculated on the basis of the following badumptions:

• Estimated number of households requiring rental housing – 1 to 2 million
• The monthly rent is between 400 and 600 ¢
• Exchange rate (February 19) – 1.00 USD = 5.00 SGH

Table 1. Estimated rental market value (monthly)

Table 2. Estimated rental market value (annual)

Although the figures above are based on more than one million properties. Based on the above, at 500 ¢ per month and 10% of market value, a homeowner could earn US $ 8 million per month and US $ 96 million per annum. If developers had to meet the highest standards, the maintenance costs for the first three years would be minimal or even zero. However, for rent to be profitable, developers should put in place an efficient and effective housing management organization to manage operations.

The future investor in the rental sector should also have a development plan of 5 to 10 years and have the ambition to exceed the break-even point of its housing stock during this period. This lack of understanding and knowledge of the management or operation of housing services is why many have literally ignored the construction market.

The rental housing market offers great opportunities for business growth and rapid housing development. According to the 2011 Ghana Housing Profile Report, more than 2 million civil servants could benefit from a rental housing program. They are also self-employed or private sector. Just paying 500 cents a month for decent housing would be a great benefit to the investor and the tenant.

We can not really say that we offer affordable housing when rents account for less than 50% of the tenant's monthly income. Ghana has a large and largely untapped rental housing market that requires financial investment. However, those seeking to exploit this as an investment opportunity must have a long-term strategic plan and engage housing management professionals with the skills to deliver the services that can guarantee the return on investment.

Profile: Kwadwo Owusu-Darko is an architect specializing in housing. He has over 20 years of experience in real estate development, regeneration and housing management in the UK. He was a director and president of two housing badociations. Currently working on setting up a think tank to support housing development in Ghana. E-mail: [email protected] Post comments @Blog: https://owudarko.wixsite.com/website