Doing the Math for Ghana Real Estate

Polo Heights

Who can buy an entire tower?

Given the prices at the luxury end of the market, I find it difficult to establish how prices can continue to go up.

Who are the buyers?  Unlike more developed markets, Ghana real estate is largely purchased with cash.  Typically, a buyer will pay 25 percent as a deposit, then 25 percent at the start of construction, another 25 percent at another milestone, and finally another 25 percent when the keys to the house are transferred to the new owner.  The time frame for this entire process may be 12-24 months.

For a “lucky” few, mortgages are available at, what I consider, usurious rates.  Typical mortgages in Ghana may have a term of 8-10 years, interest rates near 30 percent, with say a 20 percent deposit.  For those who work for banks, they can get much lower interest rates.  Furthermore, the buyer is borrowing in cedis for properties typically priced in US dollars.

For example, say you want to buy one of Clifton Homes‘s 3BR townhomes in East Legon starting at $280,000.   If you have the cash, good for you.  If you can get a mortgage, then let’s say you pay 20 percent down, have a term of 10 years, and an interest rate of 30 percent.  Your payments will be $5,900 per month.  I don’t know what the bank employee’s borrowing rate is but let’s assume it’s the same as the Bank of Ghana‘s rate of 20.8 percent. Your payments would be reduced to $4,400 per month.

That’s the math.

Possible buyers:

Domestic Population: According to the CIA World Factbook, Accra’s population is 2.4 million — though I have heard estimates as high as 4 million.  Let’s say the average household size is 6 people.  Thus, there are between 400,000 to 670,000 households.  The middle class population is estimated to be 15-20 percent of the total population.  I’d characterize the middle class as families making at least 5,000 cedis per month or $2,500 per month.  The truly wealthy can’t be more than 5 percent of the total population or 20,000 to 33,000 households.  What if the wealthy is 1 percent of the total population or 4,000 to 6,700 households. Is that a large enough segment to support the luxury end?

Ghanaian Diaspora: This is a real possibility because there are thousands of Ghanaians working in the UK, US making incomes that could support these figures.  Essentially, these are Ghana’s best and brightest who are making dollar or pound salaries and may be interested in buying a house for the family or as an investment.

Foreign Buyers:  This is also a possibility because Ghana is often deemed a safe haven in West Africa.  It’s probably the most stable country in the region which makes Ghana an attractive place for wealthy people to park their money.  Furthermore, relatively lax capital flows into Ghana make people who have obtained their money through illegal means to purchase real assets.


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  4. Addo

    Why toy with possibilities? Why not do some empirical research? Call up developers with sold units and ask about their clientele (many may not discuss but others will);better yet, talk to real estate agents about the clientele buying up properties. Good article, otherwise. I’m just pushing for some more empiricism since most of the questions you surmise can be answered with some hard facts and figures 🙂

  5. Kingsley

    Bank employee’s borrowing rate is in the single digits for cedi mortgages. That’s why those jobs work out and they can live beyond their salaries. Low cost of credit. They can make back the credit cost just by doing treasury bill investments. A lot are more creative. I know this for a fact.

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