Guest Post: Real Estate Prices to Reduce?

These are the thoughts of Peter Tsikata, a real estate consultant who believes that luxury apartment prices are likely to decrease in the coming years. This prediction is as a result –  Find out how this will happen

Why do I predict that the high luxury real estate prices occurring in Ghana will be on the decrease? Because the luxury real estate market in Ghana has been so flooded and saturated with so many industry players that, suddenly, we now have a glut and an oversupply of properties in that segment of the market; and the laws of simple economics will have to apply: Supply will outstrip demand and prices will have to come down to excite demand. There is absolutely nothing they can do – I mean those real estate developers who already have so many projects in the pipeline, whose construction loans have already been approved and projects already started. They must simply go through the process and possibly get a haircut on their profit margins when their projects are completed and ready for the marketplace.

In the year 2010, there were very few apartments in Accra. The following year, 2011, was the year Ghana was being touted by the World Bank and the International Monetary Fund (IMF) as the fastest growing emerging market economy in the world! (Ghana 20.146 percent, Qatar 14.337 percent, Turkmenistan 12.178 percent, China 9.908 percent). More and more apartment projects sprang up in Cantonments, Ridge, Osu, Dzorwulu and the Airport Residential Area. The new enclave called Airport City became a construction site for brand new offices and luxury hotels. In those days, hotels in these areas were reporting 100 percent occupancy and rental prices for apartments in these areas were sky-high. It was easy to rent an unfurnished three bedroom luxury apartment in these areas for anything between $3000 to $4000, and you could easily buy these same units for $400,000 to $500,000. They sold off quickly and made very good money!

Today, in 2015, it is a completely different marketplace. Recently completed apartment projects are empty, literally begging for buyers or renters to pick up! Because I am on the ground floor in our industry and I happen to be in direct contact with both buyers and renters on one hand and sellers and developers on the other, I am going to use my most recent experience on the ground to buttress the point I am making in this essay. I recently got engaged by an investor who had purchased these beautiful 20+ units of apartments in a gated community two years ago in a highly desirable part of town. Except for two tenants, the property remained empty for the entire period until five months ago when I took up his appointment. At that time, the rent the property owner was asking for his three bedroom apartment was $2500 per month. I told him to reduce the price. Reluctantly, he agreed. So from $2500, we went down to $2000, then to $1800 a few weeks after and finally down to $1600.  Guess what? Today, a lot of tenants are filling up those apartments very fast and are even bringing their friends to come by and snap up the remaining units. I have promised the owner that the property would be completely filled up before I take a vacation this November! Lesson learned.

Why would you want to keep your 20+ units of apartments empty just because you want a certain price for your property that buyers or renters are not willing to pay? The lesson from this simple example is this: it is better to charge a lower rent/price for your property and get it all rented/sold very quickly because it is the marketplace that determines the price and not you! The marketplace, period!

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