Home ownership is much more than a financial goal. For many, it is the crowning glory of a life of work, planning, saving and self-denial. People of my generation (born mid-80s to early 90s) grew up expecting that a 3-bedroom house with a compound, an Indian Almond tree and a dog running around barking at strangers, was at the other end of 16 years of education and 20-30 years of work. But this expectation has long since turned into a dream. And with each passing day this dream is looking more like a fantasy.

The numbers are simply not on the side of the would-be homeowner. According to the Ghana Living Standards Survey 7, 2019 (GLSS 7) 42% of Ghanaian households own their home, 28% of households rent while 30% live in a house they do not own but are living in rent-free. That does not sound too bad, until you dig deeper and find out that these statistics are skewed by the large number of households in rural areas who own their home.

A whopping 58% of households in rural areas own their own home. We can speculate that this is as a result of the extended family system, ‘family homes’ that have existed for generations, and cheaper building materials (apart from the Greater Accra and Ashanti regions all other regions have at least 35% of homes made out of mud or earth). In Greater Accra, only 28% of households own homes and 40% rent. In the city of Accra itself, only 18% of households own homes while 49% rent.

Ghana’s capital city sticks out as an especially difficult place to own a home. Many people have given up on ever owning a home (or even renting) in Accra. Towns surrounding the city have benefitted from the spillover as land and house prices in places like Kasoa, Oyarifa, Amasaman and Dawhenya are rising at impressive rates and people are forced to move further and further away from the city. While the reasons for this pricing out of people are not exactly mysterious, it would be helpful to examine the causes one after the other.

Accra is the only game in town

There are 7.3 million households in the country, out of which 1.3 million are in the Greater Accra region alone. That means 17.8% of all the households in the country are located in only 1.4% of Ghana’s land mass. It’s no wonder Accra was ranked as the 6th most expensive city in Africa in 2020. Accra is Ghana’s political and economic centre. It houses virtually all the headquarters of state and government institutions as well as the headquarters of corporations. It is the urban Mecca of a country whose population moved from 23% urban in 1960 to 51% urban in 2010. Inflation in Accra is always above the national average. With such a situation, how will real estate prices not be through the roof?

Public Transportation or the lack of it

One consequence of the high population density of Accra is that traffic jams are long and common. This places a high premium on real estate located in or around the major commercial or administrative areas. What is happening is that people want to own decent property without having to have long commutes to and from work. The absence of adequate, decent and timely public transportation options mean that people who stay far away from the city cannot keep a job in the city unless they spend hours of their lives in traffic. Hours that are cut away from their sleep, their leisure or work time. That is such a dreary way to live life.

Land administration is a nightmare

Yaw Oteng Asante, a top executive at one of the largest private estate developers in the country, was kind enough to explain why houses cost more than the life earnings of so many residents of Accra. The very first culprit, he explained, was the land tenure system. Acquiring land in Ghana is difficult and it’s doubly so in the capital. Apart from the purchase price of the land, which is absurdly expensive for reasons already apparent, you also need to spend a significant amount getting all the required documents and permits. And that does not guarantee that you will not face litigation or that you will not have land guards try to keep you off your own land.

Running water and electricity

The real estate company has to make the investment to bring in the electricity and water to the properties it is developing. According to Mr Asante, this could cost as much as the value of the land itself. For anyone who has ever had to get a home connected to electricity, you know that the cost of the pole and the meter is no joke. Getting water to flow takes so much effort that many people are resorting to digging boreholes or relying on water tankers. This state of affairs is another contributor to the prices of real estate.

Building Materials

Probably the most surprising thing that Mr Asante told me was how much Ghana relies on imported building materials. I would not have imagined that a whole kitchen can be fashioned and imported directly from Turkey to be installed in a Ghanaian home. But with that aside, the rate at which the prices of cement, iron rods and wood are rising is ridiculous. Cement prices have risen from about GH¢30.00/bag to about GH¢50/bag in just 2 years. That’s an annual rate of 29% and at that rate we should expect the price of cement to double every 2.5 years. Are we going to be surprised if property prices double over that same period?

It’s the economy, stupid

Mr Asante made an interesting point during our interview. He said that we tend to look at the symptoms (outrageous real estate houses) in isolation without considering the root cause. For every residential housing unit he attributes 20% of the costs to land and infrastructure i.e. roads, utilities, et cetera; 70% to the actual cost of building; and 10% to fees and charges. After this cost, the developer now has to include a mark-up that covers overhead costs, and crucially, financing costs. High borrowing costs have been a perennial problem for entrepreneurs in Ghana for as long as I have followed the issue. Banks lend to real estate developers at high rates which they pass on to the final customer. Include the fact that the developer has to meet these interest payments during times when the property has not yet been sold or occupied and you can understand how prices can remain elevated even for unoccupied buildings. And did I mention that some of this financing is in US dollars?

Solutions?

Before writing this post I would have thought that there would be straight-forward solutions to the problem of unaffordable real estate in Ghana. However, it is now clear to me that this problem cannot be solved in isolation. For starters, demographic trends are almost impossible to slow down or reverse. It is clear that Ghana is on the path to become a country in which the majority of people live in urban areas. Until something happens that changes that trend, we will continue to see upward pressure on prices.

The general economic condition which allow these real estate prices to keep rising has to be addressed. This includes high borrowing costs, a high inflation rate, rapid depreciation of the exchange rate and a reliance on imports for products which can be made in Ghana. Infrastructural challenges too will need to be addressed. We need railways, expanded access to water and electricity and a public transport system complete with dedicated lanes to avoid traffic jams.

There are administrative changes that the government can make to improve the situation even as we face these structural challenges. The first is to stop making Accra the centre of every government function. Why not distribute important government offices across the country so that civil servants can take up residence in other parts of the country? Immediate attention should also be given to creating a transparent and an efficient process for land administration. Incentives already exist for factories established outside Accra, but this should be extended to service providers who move significant offices outside the capital.

As for the idea of affordable housing projects by the government, I’d rather not address that. We have had too many failed attempts for me to propose it as a solution. Perhaps experts in the field could take up the challenge of writing on that.

Accepting change

In conclusion, we need to accept the reality that a lot of us will not be able to own houses in Accra. Times have changed dramatically. Perhaps the future of homes in Accra are large skyscrapers housing dozens of apartments. Who knows? Perhaps we could own homes outside of Accra that we only get to live in on weekends because we are renting in Accra during the week. Whatever be the case, the safest bet is to believe that things will continue on the path they are currently on and it is best to make arrangements with that assumption.