Over 70% of workers not likely to ever own a home - How accurate is this?

Writing this small piece will give the public its first chance to learn from the real estate professionals in the country. When i use the phrase "Real Estate Professionals", i meant certified, skilled and qualified practitioners who understand the space market very well. This article is also not meant to defy or raze the report by the Housing Data Center, however it seeks to evaluate the accuracy of their research with respect to real estate space market.

The Housing Data Center on the 6 May, 2014 reported that Salaried workers who plan to buy a home but whose incomes fall below GHC 4, 000 may have to find a way to increase their salaries or switch to jobs that will boost their earnings. This is because, the latest report on the real estate industry has revealed that workers whose salaries fall below GHC 4,000 may be unable to qualify for a mortgage. 

I don't want to discuss mortgages in this article, simply because we don't have a vibrant mortgage market in Ghana. I am of the view that both primary and secondary mortgage markets are not functioning properly in Ghana. The primary mortgage market is the market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transactions. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market. After being originated in the primary mortgage market, most mortgages are sold into the secondary mortgage market. These two markets are not functioning in Ghana. Most Ghanaians do not rely on mortgages. They save money to acquire a piece of land and  build in phases till completion without worrying about time lag in construction. Mortgage already is not the thing of the Ghana man. The average Ghanaian does not care how much he earns before he starts building. They save towards it and that is how it has been till today.

In the real estate industry, information rest with the brokers or the brokerage firm. Brokers have a way of managing their business. They keep records of how much a deal was closed in a particular location. This information give them a fair idea on who much a particular property type within a particular geographical location may cost. That price at which both the buyer and the seller agreed on is what we term as Actual/Nominal Price. What you see on the listing, quoted by the property owner/ his agent is the Asking Price. In real estate we use the Actual Price in our analysis and not the asking price. Example a property can be listed for rent at 5000GHC per month and may closed at 4500GHC. The price at which the deal was closed is what we consider in our space market analysis.  

To confirm that the Housing Data Center used the wrong information, lets read and analyze the example extracted from their report;

"For example, in the first quarter of 2013, a two-bedroom semi detached house at Kantamanso was going for USD 69,500 while a three bedroom detached house in the same area was going for USD 180,000. The same houses are now going for USD 98,000 and USD 220,000 respectively, an increase of 23.5% and 18.5%".

I need not to throw any light on the example above, but i will touch on it briefly for the sake of those who are not real estate inclined. The example above means that prices of houses which have been in the market and nobody seems to be interested have been increased. The question is why should you increase the price of a rotten tomatoes? Real Estate like any other product reduces or maintain its price when demand is low and vice versa. A property which has been on the market from the first quarter of 2013 till now mid of 2014 has a low demand hence should reflect its pricing. Landlords in some economy's where demand for real estate is low give concessions in the form free utility bills or two months rent free just to attract tenants. It would be prudent to attribute any increment in prices to the depreciation of the cedi against the dollar since owners and their agents have listed their houses in dollars. Its doesn't make sense to increase from USD 98,000 to USD 220,000 in this current market.  

"The Housing Data Centre further warned that the situation could worsen if interest rates, fuel, electricity and transport cost continue to rise" - Economic factors affects real estate decisions, however we shouldn't forget that the space market is segmented by type as well as location. Each type is unique on its own and each location differs from the other hence you cannot rely on one location and generalize your findings. They may be misleading. 

Ghanaians  are tired of financial experts giving advice on real estate, especially when they do not actually have anything to do with real estate. Let me conclude by asking the Housing data center these few questions;

1. what is the supply of housing stock in the chosen location found in their report?
2. What is the vacancy rate in these location?
3. how much did a 3 bedroom house sold for in the same location within the last 6 months?
4. What is the percentage of salaried workers who acquired a house through mortgage within the last decade?