Cedi depreciation reduces home ownership

The depreciation of the local currency by more than 40 percent over the last 17 months has drastically reduced the number of people who qualify for mortgages.

Just over a year ago, workers who earned between GH¢4,000-GH¢5,000 qualified for a mortgage to purchase a house priced at US$84,000.

However, depreciation of the cedi has meant that to qualify for a mortgage on the same housing unit one has to earn between GH¢8000-GH¢9000.

Mr. Kojo Kwakye Owusu, Managing Director of UT Properties Limited, told B&FT that the cedi’s depreciation has narrowed the number of people who qualify for accessing mortgages to purchase a home.

“You are expecting people will go for mortgages to come and buy the houses. Initially, when the exchange rate was about GH¢2.80 you had a certain percentage of people who qualified for mortgages because of their salary levels. Now, that percentage of people has diminished by the process of depreciation elimination. Now only a few people can afford to buy houses.

“We haven’t changed our prices, they are still the same. Last year, a housing unit that cost US$84,500 at an exchange rate of about GH¢2.80 was sold for GH¢236,600. Workers earning between GH¢4,000-GH?5,000 qualified for a mortgage to acquire one.

“However, at the same price of US$84,500 given the exchange rate of GH¢4.20, it now costs GH?339,690. This requires that a worker earns between GH¢8,000-GH¢9,000 before they qualify for mortgage to buy these units.”

B&FT analysis in May showed that since January 2014 the cedi has lost 43.8 percent of its value to the US dollar, despite a raft of measures introduced by the central bank and an International Monetary Fund programme to stem the rapid depreciation.

Last year the cedi lost about 31 percent of its value after a string of poor performances, largely in the first half of the year. The slide prompted the central bank to introduce forex restrictions which market players accused of being counterproductive.

Building contractors have also had to bear the brunt of the continuous depreciation of the cedi. A situation Mr. Owusu admits has made “planning very difficult”.

“Contractors import the sheets that they have to fabricate. So if the cedi has lost its value by almost 50% over this period, they have to bear the exchange rate losses.

“It also affect iron rods, tiles, and finishing materials. We don’t produce all these things in Ghana. That is the challenge we are confronted with on the construction side. This is making planning very difficult. Things are always changing on the market,” he said.

The country’s housing deficit is estimated at 1.7 million units, a figure thrown into doubt by some experts. An ISSER report early this year cited the lack of a coherent plan and short-sightedness of policy-makers.

Government’s attempt to address the housing deficit some three years ago fell through. It is now offering the same incentives it offered STX Ghana to local investors so as to help bridge the housing deficit.