Ghana offers the best Real Estate investment opportunity in West Africa, according to a survey conducted by Clifton Homes of global property experts. 52% of the professionals interviewed believe Ghana will offer the best financial returns in the region over the next 2-3 years.
The survey gathered the views of over 50 real estate professionals from across the globe including fund managers, property consultants, academics and financial analysts. The experts, from organisations such as Broll, JP Morgan, Pam Golding and the University of Lagos were questioned on the attractiveness of West African real estate as a viable investment opportunity.
The Ghanaian market was judged to be the most attractive real estate investment opportunity in West Africa, expected to deliver the highest level of profits over a short term (2-3 years) or long term (10 year) horizon. With the 2012 GDP growth rate in Ghana expected to be amongst the highest in the world, the survey revealed broad consensus about the positive implications for real estate. 85% of experts interviewed expected real estate investments in Ghana to outperform the regional average over the next 5 years.
Nigeria was identified as the next most attractive investment market, with one third of experts favouring real estate in West Africa’s most populous nation. “Nigeria will continue to deliver good returns” said one London analyst “but the residential real estate market, particularly at the luxury end, is maturing now. By comparison, Ghana is at an earlier stage in the development cycle and should provide better returns over the next decade”.
Tourism related real estate development in Cote d’Ivoire was pinpointed by a third of experts as holding strong investment potential over the longer term. Notably, experts identified very few opportunities in Travel and Tourism investment in the region. “Tourism has brought a lot of international real estate investment to both East and Southern Africa, but that opportunity is not front-of-mind when it comes to West African markets” commented one American analyst. “From an external perspective, our instinct is that the strongest growth in the region will lie in retail, offices and industrial real estate”. 60% of experts surveyed said they would consider investing in commercial real estate in West Africa.
Accra buy-to-let opportunity underestimated
The majority of survey participants expected Lagos to offer the best annual rental yields on city homes, where rents for a 4 bedroom house in a prime area can average $11,500 per month. However, according to a 2011 Knight Frank Report, rental yields are actually lower in Lagos (8%) than in Accra (9%) where renting a similar property might cost $4,000 per month. According to Clifton Homes Managing Partner George Moffet, “Accra offers great yields for investors who can find the right combination of price, location and quality when purchasing a buy-to-let property. Compared to Lagos the upfront investment level required is relatively low, yet yields in excess of 10% are achievable in the right locations”.
The survey also revealed that foreign buyers overlooked the advantage of upfront rental payments in Accra, with over 50% expecting to collect only 1 to 3 month’s rent in advance from tenants. However, the law permits landlords to collect 6 months rent up front and, in reality, the standard practice of collecting 1 or 2 years rent in advance persists across the Capital.
Another misperception disclosed by the survey concerned the price of property and average rents in central Accra – both of which were significantly underestimated by all interviewees, unless they had personally lived in the Capital recently. Foreign professionals estimated a new two-bedroom apartment in Airport or Cantonments would sell for under $100,000, whereas average prices are closer to $300,000 and some developers are selling at prices in excess of $600,000.
Political stability attractive to investors
Property professionals from around the world held a positive view of Ghana’s political stability, with well over half of respondents saying political stability would not be of concern to them when considering investing in the country. However, over 35% of interviewees expressed major concerns over the legal and administrative red tape involved in buying property in Ghana, as well as the transparency of these processes. As might be expected, these concerns were far stronger amongst experts from Europe and the USA than experts from other African states.
“There persists a perception that investing in property in Africa (not just Ghana), must be an arduous administrative process. In some cases this view is justified, but buying a new-build property can be a straightforward and low risk investment if the process is managed efficiently. This is true whether the buyer is a Ghanaian National or otherwise” says Ernest Hanson of Clifton Homes. Results from the World Bank’s 2011 Ease of Doing Business Index suggest that these negative perceptions are largely unfounded. Ghana ranks 67th out of 183 countries in terms of providing a transparent and efficient environment for conducting business transactions. This places Ghana above all of its ECOWAS neighbours and all of the BRIC nations (Brazil, Russia, India and China).
Negative perceptions a region-wide problem
Despite positive comments relating to Ghana in the context of West Africa, the survey confirmed that there remains a significant degree of caution amongst international investors about the region in general. Over half of those interviewed claim that investing in West Africa was “too risky” and would not consider it. As may be expected this caution was highest amongst European and American professionals, one of whom said “it will take several more years before the perception of Africa in general shifts significantly, despite good examples like Ghana and South Africa”. However, a recent survey from Ernst and Young demonstrates this transformation is underway. In their 2011 “Africa Attractiveness Survey” involving over 500 global business people, 68% claimed that doing business in Africa was more attractive now than 3 years ago. 75% claimed that the region will become even more attractive to business investors in a further 3 years. “It takes time to gain the trust of both personal and institutional investors” says George Moffet “but Ghana is setting a good example in the region. The more responsible developers embed positive market practices, the quicker investors will come to realise the true long term potential of our market.”