Experts believe that a proper mortgage system will play a key role in solving the housing problem in the country with a population of over 23 million.
Dr. Sam Mensah, an economist and Chief Executive Officer of SEM Group Limited, an investment advisory firm, is of the view that effective demand for houses by ordinary people should be the main focus but that can only be done if the mortgage system is properly done.
Dr Mensah who was a former Technical Advisor to the Ministry of Finance and Economic Planning, thinks that the mortgage system in the country has rather focused attention mainly on the supply side rather than demand.
“We are not going to solve the housing problem without talking about the demand side. Yes there is a housing gap… Effective demand means that people who need the house and have money to afford it can’t do so until this country develops a sensible and affordable mortgage system,” said Dr Mensah at a stakeholder’s forum in Accra put together by Channel Two Communications.
“I think if you don’t solve the mortgage problem, we will not be able to solve the housing problem because once you solve that all the other pieces fall into place. That is one pillar of the housing problem,” he adds.
He explains “For example if an ordinary or average income person wants to buy a house, you go round looking for a mortgage, the maximum mortgage they can get in terms of maturity is 10 years. If you take ten years to amortise a house of GH¢50,000, for the average person in Ghana, being a middle-income person, you have to be paying more than 50% of their income every month towards the mortgage. And therefore they cannot afford it. The developers might be building but they can not afford it. So there is no effective demand.”
Dr Mensah noted that every country that has been able to tackle the housing problem has had one of the major pillars on the housing system on the mortgage side.
“In Europe, developed countries, in US, Canada where home ownership is very high, government has taken the lead.”
The housing problem is both an economic and social problem so we can not leave government out but we are looking at countries where mortgages can be amortised for over 25 years so that it takes for the average person about 25% of their income to service the mortgage, he observed.
Dr. Mensah further emphasised that a proper mortgage system gives estate developers more confidence to borrow to start and complete a project.
“Now, once you have a working mortgage system, in some cases guarantees issued by government, and the developers or construction finance institutions. Because the developers know that once they borrow and build the houses, upon completion, there is a mortgage system awaiting so that the buyers of the houses will be able to quickly pay and the developers move on to other projects,” he said.
The forum was attended by the Minister of Works and Housing, Mr Alban S.K. Bagbin, Mr Edward Effah MD of Fidelity Bank, officials from Lands Commission and estate developers.
By Ekow Quandzie