A Senior Economic Analyst at Databank, Courage Kingsley Martey, has said that the increasing number of millionaires in Accra could boost the luxury property market.
This would be at the expense of the low to middle income class ,which constitutes the bulk of current demand.
Mr Martey stated that he expects more real estate developers to exploit the high-end property market as they seek to maximize their margins. This is in view of a recent report published by South African-based research company, New World Wealth. The report listed Accra as one of the top ten African cities for millionaires.
He emphasized that businesses seek to maximize value and in the case of real estate, the lower end of the income spectrum is not seen as lucrative enough given the current economic difficulties that tend to increase their default risks. For this reason, real estate developers could tailor their products to meet the high-income bracket.
High-end property investment sustainability
Mr Martey believes that though the report may come as welcoming news to estate developers, the sustainability of luxury property investment will face the test of time. He said that the bulk of Ghana’s real estate demand is in the middle-income segment.
He explained that the continued investment in luxury properties would lead to middle income earners being unable to meet mortgage requirements. This effect, known as crowding out, will force developers to adapt their products to satisfy this market.
“Businesses look to meet demand so I see the increase in millionaires as an incentive for real estate developers who want to continue investing in the high-end property market.Its sustainability that is however questionable, because ultimately, the bulk of the demand lies with the middle income segment. So, if mortgages are mainly geared towards the high-income segment, we would quickly see saturation on that end of the market while a chunk of the population would be crowded out of the mortgage market.
“This would prove unsustainable in the medium term and could compel developers to tweak their products to serve the growing demand of the middle income segment,” he said.
Mixed reaction from estate developer
The Marketing Manager of DP Group Ltd, a real estate company specializing in luxury properties, Felix Attua-Afari, agreed to some extent with Mr Martey’s opinion.
He believes that the report confirms Accra as one of Africa’s most attractive destinations and is likely to ramp up more interest in the property market. As demand rises, prices would increase in the prime locations of the city, he said.
Mr Attua-Afari said that although the middle-income segment is likely to be priced out of the prime areas in Accra, a number of developers already cater for this segment.
“There are some developers who invest in property on the outskirts of Accra. As long as they do, with the continued assistance of banks and mortgage lenders, middle income earners will be able to afford such properties,” he said.
Mr Attua-Afari believes that with the continuing investment of properties on the outskirts of town targeted at middle-income earners, this segment would have their housing needs met.
Managing Director of Lamudi Ghana, Akua Nyame-Mensah said: “Accra is growing in importance with respect to investment in Africa. The recently published World Wealth Report suggests that developers must adapt accordingly to suit this growing demand.
“The middle-class segment is equally important. We must ensure that measures are put in place to enable them purchase property since they are the backbone of our economy,” she said.