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July 31, 2018

Ghana’s economic growth and increasing supply of prime real estate assets make it one of Africa’s most interesting markets for investors.

The West African nation saw annual GDP growth rise to a five year high in 2017 at 8.3 percent, compared with 3.7 percent for 2016, fuelled mainly by a pick-up in oil production. While growth slowed from 2011 to 2016, it’s now gaining pace and expected to remain elevated at 7.2 percent in 2018.

Rich in industrial minerals, hydrocarbons and precious metals, Ghana’s exports are heavily resource-driven but services make up 50 percent of GDP; local company Rlg Communications was the first company in Africa to assemble its own computers.

Ghana looks set to have “one of the strongest economic growth profiles on the African continent in the short and mid-term,” says Tom Mundy, Head of Research for Sub-Saharan Africa at JLL.

This growth has been fuelled by an environment increasingly conducive to doing business.

A changing real estate landscape
Real estate, as is always the case in emerging economies, has lagged the recovery in the economy. Hence in the short term, weakening demand and increased supply have put pressure on vacancy rates and rental growth assumptions, though this is now starting to settle, says Mundy.

“Nevertheless, the highest quality assets have largely remained fully leased and, with the economy improving, we see 2018 as a turning point. The capital, Accra, is well placed as a hub for business and travel in West Africa and we expect a pick up in the real estate market to reflect that in the mid-term.”

In common with other nations in Sub-Saharan Africa, real estate investment transactions in Ghana are negligible. However, Accra has seen an increase in the supply of quality real estate assets in recent years, which will further attract investors.

For example, Mundy says Accra has seen a number of high quality retail centres added over the last few years, although this has led to concerns about oversupply in the short term. At present, the office sector is attracting more interest.

The CBD is Accra’s prime office location but Mundy says Airport City, a new district close to the airport, “will become an increasingly attractive option for global corporates as quality supply comes to the market.”

Looking ahead

In the longer term, Ghana is one of several African markets with potential for investment in affordable housing. It is estimated that the country has a shortfall of 1.7 million units.

In March, dual listed Mauritius and South Africa-listed real estate investment company Grit Real Estate Income Group announced its transaction to acquire 5th Avenue Corporate Offices, a three-storey, fully-let 5,070 square meter, A-grade office complex in Accra from Greenline Development Limited.

Announcing the acquisition, Grit chief executive Bronwyn Corbett, said: “Ghana has been earmarked as an expansion country based on its strong fundamentals. We have been monitoring the country’s economic reform with interest since 2014 and the real estate market has sufficiently repriced to meet our various investment hurdles”.

“There is a strong political will to implement REIT legislation in Ghana, which will allow further tax efficient structuring and access to local capital looking for a unique investment offering.”

Despite having one of the most open economies in Africa, Ghana remains a relatively risky prospect for investors.

“The primary risks for all African investments are currency weakness which stems from poor fiscal management by the government and an over-reliance on the export of commodities to support fiscal buffers,” says Mundy.

“The good news for Ghana is that after a challenging few years, the economy is starting to fire again and off a much more balanced base, with less volatility than its neighbour Nigeria.”

“We are encouraged that sentiment towards Accra appears to be turning something of a corner with international capital increasingly active in the city.”

Click to find out about how a new real estate exchange could help single properties go public.

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Tom Mundy

Head of Research, EMEA, JLL

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