{"id":387022,"date":"2016-04-27T12:29:33","date_gmt":"2016-04-27T12:29:33","guid":{"rendered":"http:\/\/citifmonline.com\/?p=387022"},"modified":"2017-12-28T12:40:00","modified_gmt":"2017-12-28T12:40:00","slug":"the-monster-in-ghanas-dollar-mortgages","status":"publish","type":"post","link":"https:\/\/citifmonline.com\/2016\/04\/the-monster-in-ghanas-dollar-mortgages\/","title":{"rendered":"The \u2018monster\u2019 in Ghana\u2019s dollar mortgages"},"content":{"rendered":"

A very good friend who works with one of the housing companies told me about a heartbreaking story of a young couple who lost their home within just 3 years.<\/p>\n

With one kid, this young family was thrown out of a house they believed their daughter would grow in and they would not worry about moving from one rented apartment to another.<\/p>\n

How did it happen?<\/strong><\/p>\n

The Cedi fell sharply against the dollar, their salaries remained the same and their mortgage repayment which was in dollars grew past their salaries. They couldn\u2019t keep up. Everything came tumbling down!<\/p>\n

Ghana\u2019s housing deficit has hit 1.7 million now.<\/p>\n

To make it easier to understand, it means spreading it over a 10-year period, a minimum of 170,000 housing units would have to be built annually, according to the Ministry of Water Resources Works and Housing to make sure accommodation in Ghana is no longer a jungle for the survival of the fittest.<\/p>\n

It certainly will be a dream to think we can achieve a fraction of this as a country. It won\u2019t happen because the government is busy with something else it considers priority. In fact the scary and ever-increasing housing deficit has never been a priority for many governments over the past 3 decades or so.<\/p>\n

As a friend put it, government has been \u201cblowing its dead horns of affordable housing.\u201d<\/p>\n

The prices for government\u2019s new State Housing flats at Adenta in Accra is around GH\u00a2300,000 for a 3 bedroom house.<\/p>\n

How about that for affordability!<\/p>\n

\"Example<\/a>
Example of government\u2019s affordable housing<\/figcaption><\/figure>\n

The scary and bitter truth is that, the \u201cvampires\u201d in this unregulated housing industry will suck the vulnerable dry for a very long time to come.<\/p>\n

Assuming you acquire a mortgage facility for about GHc240, 000 and a bank gives you a maximum of 80% with an average rate of 29%. Your income should be GH\u00a214,547.19 to qualify. Down payment for this house is GH\u00a260,000. How many people can afford this?<\/p>\n

Don\u2019t EVER take a dollar mortgage.<\/strong><\/p>\n

In the first quarter of 2015 alone, the Cedi depreciated by about 16% to the US dollar. In the same period last year, it depreciated by over 19%. In the entire 2014, it depreciated by more than 40%.<\/p>\n

If you bought a facility for about $80,000 hoping to pay in 20 years, you are looking at a monthly repayment of about $937.36 (40% of net monthly income). The dollar income for this loan amount is about $2,343.15=Ghc8, 903 with an exchange rate of 3.8%. This is only the ideal situation.<\/p>\n

With the current depreciation of the Cedi, \u201cPlay with the different exchange rates over the period and you will see how worse off the mortgagor will become. The Mortgagor can only be better off if the appreciation rate of his cedi income is perfectly matched with the rate of the cedi depreciation or the appreciation rate of the dollar,\u201d an industry player who pleaded with anonymity said.<\/p>\n

This however can never be the case so some banks advise that a component of your income should and must be in USD before you can qualify for a USD mortgage loan.<\/p>\n

\u201cEven though we are looking at giving you a place to lay your head, we are also looking at managing risk because the default rate for dollar rate for resident Ghanaians is very high. Foreclosing of properties is not pleasing to the bank. We have had people switching from USD denominated mortgages to Cedis from both externally and internally. It gets quite unbearable for the customer,\u201c the source noted.<\/p>\n

Currently a two bedroom house stuck in the corner of the outskirts of the city will be between $50,000 and $120,000. According to some of these people who are in the industry; they do not even spend a quarter of that amount to build the facility. Add the risk, cost of credit, cost of the land plus litigation, they are still fleecing people but they are desperate to find a decent place to put their families.<\/p>\n

The weakening of the Cedi against the US dollar in Ghana is like a weather pattern. It happens every year and the authorities seem to have accepted that it has to happen. The implications on businesses, imports, transportation, even the entire economy seems to be lost on them.<\/p>\n

Don\u2019t ever hope that the Cedi will be stable against the dollar for a long period of time. If you buy a house in dollars, in just about two years if you are lucky, the repayment plan will either double or quadruple, depending on how fast the currency falls.<\/p>\n

Find a Cedi mortgage<\/strong><\/p>\n

The Cedi mortgage is usually hinged on interest rates. True, interest rates in Ghana are high but it\u2019s certainly better than the dollar which can depreciate by an average of about 20% in just three months.<\/p>\n

I have heard people say it is practically impossible to find a cedi mortgage. It is not true! Even some of the mortgage companies offer cedi mortgage but their interest rate is incredibly high too.<\/p>\n

But look and ye shall see.<\/p>\n

Seek and ye shall find<\/p>\n

Reality check<\/strong><\/p>\n

Affordable housing is a mirage. There is a public sector home owner scheme between the Ministry of Finance and a bank, the maximum loan a public sector worker can get is GH\u00a255,000. \u00a0The interest rate for this is subsidized at 15%. Only a handful of developers participate in the delivery of homes matched to this loan amount but they build extremely basic homes.<\/p>\n

Cedi interest rates can only go down if the government stops competing with banks for funds in the market. It is killing!<\/p>\n

For the future outlook, it would be difficult to project but truth be told, a dollar mortgage is a bad idea, I think.<\/p>\n

–<\/p>\n

By: Nana Boakye-Yiadom<\/p>\n

Email:\u00a0boakyeyiadomn@gmail.com<\/p>\n","protected":false},"excerpt":{"rendered":"

A very good friend who works with one of the housing companies told me about a heartbreaking story of a young couple who lost their home within just 3 years. With one kid, this young family was thrown out of a house they believed their daughter would grow in and they would not worry about […]<\/p>\n","protected":false},"author":7,"featured_media":387028,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,374],"tags":[7248,12397,3,15699,325],"yoast_head":"\nThe \u2018monster\u2019 in Ghana\u2019s dollar mortgages - Citi 97.3 FM - Relevant Radio. 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