Dollar-priced homes: More houses, but still a housing crisis - Ibrahim Al-Muazam
A commentary by Ibrahim Al-Muazam, a PhD Candidate in Interdisciplinary Humanities at Brock University, Canada, argues that Ghana’s housing challenge goes beyond the number of houses being built.
Ghana's housing market is undergoing a shift as developers increasingly price residential properties in US dollars, sparking debates about who the formal housing sector is truly catering to. While developers point to soaring construction costs, imported materials, and exchange-rate fluctuations as driving factors, critics argue that dollar pricing could exacerbate the difficulty of homeownership for the majority of Ghanaians who earn their livelihoods in cedis.
Ibrahim Al-Muazam, a PhD Candidate in Interdisciplinary Humanities at Brock University, Canada, contends that Ghana's housing challenge extends beyond the sheer number of homes being constructed. The true test, he argues, is whether ordinary households can actually afford these properties. With an estimated housing shortfall of about two million units and the World Bank warning that formal housing remains unaffordable for the bottom 80 percent of the income distribution, a crucial question arises: what purpose is served by adding more houses to the housing stock if most Ghanaians cannot partake in them?
Ghana's construction industry is heavily reliant on imported materials and equipment. Fluctuations in the cedi's value against the US dollar can lead to steep increases in the cost of steel, electrical components, specialized equipment, and other inputs. Developers who agree to sell homes at fixed cedi prices before completion may face significant losses when the cedi weakens.
Dollar pricing, in such situations, offers a means of safeguarding the value of their investment. However, Al-Muazam's commentary questions whether the entire property value should be denominated in dollars when a significant portion of a Ghanaian property's worth is generated locally through land, labor, transportation, construction, and professional services.
For a Ghanaian earning cedis, the consequences of dollar pricing can be substantial. If the cedi depreciates before the buyer completes payment, the property's value remains the same US$300,000, but the buyer needs significantly more cedis to secure the equivalent dollar amount. While developers shield themselves from currency risk, the buyer's income remains vulnerable to exchange-rate fluctuations.
Al-Muazam's commentary suggests that dollar pricing may not eliminate currency risk but rather transfers it from the developer to the buyer.
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