Implications of COVID-19 on Real Estate in Ghana
By March 2020, the world had ground to a halt in the face of the coronavirus pandemic. To contain the spread of the virus, countries implemented extraordinary measures such as lockdowns, restrictions on movement, border closures, mandatory quarantines and vigorous testing. These measures have impacted all facets of life globally both negatively and positively.
The first two coronavirus cases were reported in Ghana on March 12, 2020, and have since escalated to a staggering 6000+ cases as of May 20, 2020. Between that time, Ghana implemented similar measures including a partial lockdown in COVID-19 hotspots.
Ghana’s partial lockdown has since been lifted due to its economic repercussions across the country’s industries. The real estate sector is no exception. How has Ghana’s real estate sector fared?
Covid-19 Negative Impacts on Real Estate in Ghana
All aspects of the real estate industry in Ghana were hard-hit by the knockoff effects of the government’s measures to contain the novel coronavirus.
Reduced Buying Power
Buying patterns have changed significantly since people were forced to stay home. The cost of essential goods and services such as food, medicine and transportation have been hiked with no sign of prices returning to normal. Within this period, people have lost their jobs with more job cuts expected for the rest of the year.
This has left people with limited (if any) disposable income. Consequently, many people, including home buyers, are in ride-it-out, wait-and-see mode and are holding on dearly to their money until things stabilize. Ghana’s expected GDP growth is now set to sink drastically from 6.8% to 2.6% according to a report by Deloitte. With limited disposable income to work with and a gloomy economy, real estate scores very low on buyers’ priority lists.
Shattered Traditional Sales and Marketing Channels
Buying/renting real estate goes beyond viewing photos or videos. The best way to market such a tangible immovable asset is to physically show it to prospective clients through open houses or property viewings. Coronavirus has rendered that option dangerous, closing off a strong sales and marketing channel for developers and real estate agents.
Additionally, events such as housing fairs and mortgage clinics are likely cancelled for the rest of the year, costing organizers several thousand dollars. An example is the Meqasa Housing Fair which was planned for March with marketing already in full swing. Even if simply postponed, patronage for these events will be low since COVID-19 anxieties will endure possibly until the end of 2021.
It’s not all doom though. In Michigan for example, an executive order allows real estate professionals to resume in-person activities but under strict restrictions. In cases where no such restrictions have been specified, like in Ghana, using technologies such as virtual reality and video tours are a great low-risk alternative.
Rocky Waters for Online Real Estate Portals
Online real estate portals depend on real estate agents and developers working hand in hand, oftentimes physically, to function and make money. During this pandemic, these players, especially agents, are unlikely or unwilling to find and list new properties or go out for property viewings in order to protect themselves and property seekers.
Without their active marketing campaigns, these real estate portals face a decline in business and consequently, stunted cash flows. With no clear vaccine in sight, rising cases in the country and the ongoing diplomatic row between China and the USA, there are too many uncertainties about the future for agents to get back comfortably into business and at full capacity.
Uncertain Future for Commercial Real Estate
Office spaces might be the hardest hit as people adapt to working remotely. Coronavirus (and social distancing) have underscored the importance and practicality of remote working in Ghana.
Most businesses will pivot their work styles to match the workplace of the future and save on their rent and electricity costs in the long run. This will cause a decline in demand for office space because these spaces will become redundant for businesses that pivot, whether completely or partially.
According to Cushman & Wakefield, however, occupancy levels may remain the same for now, although there’s no denying that serviced offices – which are patronised by short-stay expatriate executives – may struggle. Only time will tell if companies will go back to operating as brick and mortar businesses or not.
Tenants in spaces such as malls that offer non-essential services are scrambling to make back profits lost due to the partial lockdown and/or slow sales that have followed since the lockdown was lifted. This situation is worse for businesses locked in longer leases who have already lost money as a result of the lockdown and will continue to do so if the slowdown of socio-economic activities persists. Movie theatres for instance unless they innovate are bound to suffer the most.
In sticking to the law and observing social distancing protocols, construction sites have had to either completely stop working or work at a limited capacity. Even with the lockdown lifted and the observance of health guidelines, it’s difficult and risky for construction workers to work at the same pace as they previously did. It’s also expensive and unlikely that construction companies will test their workers everyday for the virus. This affects the timeline of upcoming developments as many buyers are being cautious and skeptical about project delivery thanks to the disruption.
Dollar Property Market Decline
As observed by Kwame Adom Kankam, Ghana’s dollar rental property market is bound to see a major decline because of international travel restrictions and closure of Ghana’s borders. This rental market is largely patronised by expats whose accommodation is either paid for by their employers or tied in with their business travels. With most businesses shutting down or slowing, there may be considerable delays in their rental payments requiring rent concessions by landlords.
Additionally, this dollar market doesn’t take lump sum amounts unlike the cedi market.This will put landlords in a tight corner with landlords who rely on short let rentals making little to no money during this period This dollar rental property market includes many of the luxe apartments in Accra, top hotels and AirBnB facilities.
Tourism & Hospitality
With borders closed, social distancing protocols in place, a ban on public gatherings and pandemic weariness, tourism will be taking a back seat. Vacation rentals, hotels, recreational centres and even restaurants won’t be as patronised since everyone is staying put at home. Hotel occupancy rates for instance are down from 70% to under 30% while restaurants are expected to continue to see a 60% drop in patronage. (source). In March, the hotel sector requested a GH¢324 million monthly bailout from the government just to stay afloat and pay staff.
Should you invest in property during the COVID19 crisis?
Yes, absolutely. Below are the top reasons why you should still invest in real estate during the coronavirus pandemic.
Always in Demand
“In any market, in any country, there are developers who make money. So I say all of this doom and gloom, but there will always be people who make money, because people always want homes.” – Sarah Beeny
It might not seem like it now, but this pandemic will pass, just like Spanish Flu, Ebola, Sars and the Great Depression. The easiest thing you can do to secure future wealth is to own real estate which is constantly appreciating. After all, landlords grow rich in their sleep.
Panic Sales Mean Better Deals for You
People are desperate during a crisis and are more likely to liquidate their assets for cash. As a savvy investor, this is a golden opportunity to snag up amazing real estate at jaw-dropping prices that will bring you good returns on investment in the future, be it through rentals or a sale.
Safer Investment than Stocks
How long the pandemic will impact economies globally is anyone’s guess. Stock markets have plummeted across the world in the wake of the virus. The uncertainty of the virus and the volatility of the stock market make stocks an unfavorable investment option right now. Real estate on the other hand is secure, more predictable and will rebound once the pandemic blows over.
The Bright Side and Real Estate Opportunities in this Covid19 Era
Coronavirus is bringing major changes to how we live and real estate is not left out.
One of the most anticipated changes is a deeper incorporation of technology in the process. Online listings, virtual reality tours, teleconference open houses, electronic execution and delivery of documents, digital pitches to attract new customers, ecommerce and more are existing innovations that will become the new normal.
Buildings of Tomorrow
Working from home is all the rage now and for good reason, its proven to be an effective way to combat the virus while keeping the economy afloat. This trend will likely persist and as Forbes puts it, “we may see a shift toward larger units that better accommodate working from home.” The onus is on developers to build houses with home working in mind. This means either extra rooms, or bigger rooms, internet connectivity etc. to make it easier for tenants to deal with changing lifestyles and any other future disasters that require staying home for extended periods.
Luckily, developers like Devtraco and Devtraco Plus are ahead of the curve and have built quality houses with many of these considerations already.