Let’s develop our mortgage market
The development of a bubbling and well organized mortgage market is one key strategy experts often advocate help to improve housing finance and accessibility in the Ghanaian economy
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In the developed countries, the mortgage industry has proved to be the most capable and superior financier of the housing needs of the population.
However, the mortgage industry in Ghana compared to the developed world remains largely underdeveloped with teething challenges such as the lack of new housing supply, complications surrounding land ownership and a dearth of interest from banks due to the disconnect between the long-term nature of mortgage investments and the country’s mostly short-term banking deposit structure.
Apart from some few banks such as HFC, Fidelity, Stanbic and non-bank financial institutions such as Ghana Home Loans (GHL), many lenders pay little attention to the mortgage segment of the of the market, though some lenders offer overdrafts that are used to buy homes.
Again, aside some few banks such as HFC, most banks are not interested in the mortgage sector and do not market mortgages aggressively, as mortgages are long-term investments, which most banks do not want their money tied up for long periods.
Banks themselves lack the long-term funding to make mortgages viable, while high borrowing costs deter customers.
Another challenge is the shortage of new housing, limiting the size of the market. The government’s official statistics estimate that around 1.5m people need housing.
Those eligible for a mortgage to buy a house, the effective demand, could be possibly half of that number – 750,000 people.
But housing supply is nowhere near that level of demand, with approximately 20,000 new units being built a year, partly as a result of a lack of construction finance for developers.
According to the “Ghana Housing Profile”, the country needs 2m new units by 2020. The study was issued by the Ministry of Water Resources, Works and Housing, in cooperation with the UN Human Settlement Programme, in June 2012.
So as the housing deficit widens, foreigners and non-resident Ghanaians price out the local workers out of the property market.
To address the challenges facing the housing industry, the Graphic Business suggest that the mortgage departments of the Housing Finance Banks to adopt more strategies to make their products more known to the market.
With regard to the high interest rates impeding housing finance, the paper would like to suggest for an engagement between the government and the Bank of Ghana and banks to lower to lower their rates in order to encourage the more people to go for mortgage facilities.
It is the view of the paper that the government also has a role to play in the mortgage market by giving incentives to lenders who extend long term facilities to mortgage seekers.
The paper is by this calling on the government to also come out with a clearly defined policy on mortgage finance in the country so that it can help enhance the development of the mortgage industry in the country.
