As far back as 1999 an old school friend told me that Ghana would one day become the jewel in the crown of West Africa. At the time I thought nothing of this comment. However, as Ghana’s GDP annual growth rate has averaged 7.72% from 2000-2013, several international investors have taken note of the country’s potential.
I remember a meeting in 2006 with one of my clients, a leading real estate investment firm. I was speaking to the CEO about his company’s strategy and I noted that West Africa, and in particular Ghana, appeared to be an interesting proposition. The CEO responded that his firm had never considered West Africa as an investment proposition and was instead focusing on the Middle East, notably Dubai and Abu Dhabi. This was not an uncommon response as several other real estate clients I spoke to seemed to have little interest in West Africa, rather intending to expand their portfolios and investments into the East and Middle East.
In 2007, in the deep waters off the coast of Ghana, US-based oil exploration company Kosmos Energy discovered a substantial reservoir of oil now known as the Jubilee oil field. The finding was among West Africa’s largest, promising to change the fortunes of Ghana and its people.
Samir Jain, a former banker and CEO of UAE strategy consulting firm Phikanet, notes: “Ghana is seen as a politically stable economy and, with the oil discoveries, this has led to several large, powerful property developers in Dubai and Abu Dhabi to seek to form joint ventures with local developers in Ghana and to undertake large-scale residential and commercial developments.”
This view is also supported by Tetyana Lementarova, managing partner of the Feod Group, a leading law firm based in the Ukraine, who notes that, “since the discovery of oil in Ghana and, in particular over the past few years, we have found that our clients in Russia and Ukraine have been looking at real estate investment opportunities as they believe the returns on real estate in Ghana far exceed those found domestically”.
It is clear why international real estate investors are keen to obtain a foothold in the Ghanaian market. A recent report from the Housing Data Centre, which collates information from the real estate and housing sector in Ghana, suggests that house prices are likely to go up by at least 50% this year alone. The Ministry of Water Resources, Works and Housing believes the housing deficit in Ghana stands at around 1.7m units. At the end of 2013, it was also reported that the average retail rent in capital city Accra had risen by about 50% to US$60-$65 per square metre since 2012.
New investor profile
Companies and law firms based in Ghana are also seeing the change in the types of investors coming into the country. Elikem Nutifafa Kuenyehia, founder of Accra-based Oxford & Beaumont, has seen the change in profile of foreign real estate investors.
“In the 10 years that I have been in Ghana, there has been a significant increase in foreign direct investment. One consequence has been demand for commercial and residential properties driven by foreign investors. It is no surprise there is the high level of construction going on and pricing (as well as returns) have increased significantly. Historically, the demand has been from our traditional trading partners – the US and Western Europe. However, increasingly there is a lot more demand from other African countries – Nigeria in particular, as well as the Middle East and Eastern Europe.”
Group head of the CH Group of Companies in Ghana Kevin Dadzie has also seen changes. “Investors in the Middle East and Russia are now comfortable with Ghana and are investing and expanding their operations in the country, both on the commercial and residential real estate side, and this can only be good for Ghana.”
It is clear that both international and local companies in Ghana support the view that there has not only been a change in the perspective of international real estate investors, but also a change in investor profiles, with an influx of Russian, Ukrainian and the Middle Eastern investors seeking opportunities. Some of my real estate clients at Aspen Morris Solicitors have revised their business plans to position Ghana as a gateway to break into the lucrative West African market.
The high demand for housing and prime office space, the potential returns, political stability and the discovery of oil have fuelled investor appetite even further. It appears that the change of perspective is here to stay and the growing investments in the country can only be beneficial for Ghana.
Peter Petrou is a managing partner at Aspen Morris Solicitors and a lawyer at Feod Group.