The top neighborhoods in Accra see lots of luxury apartments springing up by the month.
While these properties make for ideal family living, many developers behind these projects also tout the investment potential of these luxury apartments.
But are these units the top real estate investment vehicle people make them out to be? And should you even consider sinking your hard-earned money into these investments?
To keep up with global trends, someone has to develop luxury apartments to serve that target market.
These estate developers haven’t been shy of embracing the challenge of establishing a new property class in the Ghanaian real estate market.
Here are some factors that shed more light on the luxury real estate market in Accra.
To match the high property values in some of the priciest neighborhoods in Accra, developers have taken the luxury apartment route.
It only makes economic sense for these property builders to upsell their buyers in order to stay in business and enjoy profits.
As happens in many cities, the land supply is limited. However, Accra’s population keeps growing, leading developers to go higher to provide housing to more people.
The luxury property market is no different. Faced with these challenges, you can see why many developers build apartments rather than mansions.
In many of these luxury properties, the prices are out of the reach of many Ghanaians. But that only shows who’s the target market for these developers.
High net-worth individuals, Ghanaians in the diaspora, and the expat community form a ripe market for luxury apartments in Accra.
But also, savvy real estate investors in other parts of the world aren’t left out. Again, should you consider investing in luxury apartments in Accra?
On the fence about investing in the luxury apartment space in Accra, here are a few points that should nudge you in to consider investing.
In the general real estate market in Ghana, buying luxury apartments from large-scale developers is one of the more straightforward investments.
This experience is often the case when compared with buying properties from indie developers. For one, you know the developer, and you’re assured there’ll be no litigation over your unit once you buy it.
You also know the developers likely engaged professionals throughout the construction project. With that, you can enjoy relative peace of mind knowing you’re investing in a solid product.
Not to say indie developers don’t take the necessary precautions, by the way.
Another crucial point to this factor is the financing options available to buy some of these luxury apartments in Accra. Many of the developers have relationships with some banks to help provide financing for buyers.
While the loan amount, term, and interest rate may vary, you’re more likely to secure such a facility when you buy a luxury apartment from a trusted developer than an indie builder.
Putting these factors together, you can assure yourself you’re reducing some development and land tenure risks associated with real estate investing.
But that comes at a cost, as evidenced by the massive price differences between these luxury apartments in Accra and other properties on the market.
The buy-to-let model offers tons of flexibility in real estate investments. It’s simply buying a property and letting it out to tenants while you collect the rent.
No, finding a tenant willing to pay your asking rent isn’t automatic. But when you finally land that tenant, the steady rental cash flow is impressive.
Again, given the target market and their preferences for some top locations in Accra, owning even a rental apartment unit in these areas is a promising investment.
Also, the different options in units – studio, one, two, and three-bedroom units – mean you can attract different tenant types depending on what you invest in.
Generally, since the smaller options move faster, you’re more likely to start enjoying some rent on your luxury apartment that follows the buy-to-let model.
Comparing that to a standalone three or four-bedroom house, the target market for the latter is limited to large households that can afford your offering.
The individual luxury apartment units are still under the overall management of the developer.
When you invest in one, you know you have professionals handling the maintenance duties for you. Depending on the developer, this may come with an extra cost.
But nothing beats the peace of mind of knowing your property is in safe management hands. It adds extra weight to the buy-to-let model, as you can sell tenants on excellent property management.
Lastly, excellent management helps maintain the value of your luxury apartment. Depreciation will eat away at the value of your property, but proper maintenance will reduce its effect.
Luxury apartments in Accra are a healthy option for savvy investors looking to diversify their real estate investment portfolio. Of course, the Ghanaian real estate market has quirks that differentiate it from other regional markets.
The risk and return profiles may vary, but the promise of shielding your real estate investment from troubles in other markets is promising.
Also, given the strength of the US dollar against the local Ghana cedi, holding those dollar-priced real estate investments ensures you limit the currency risks.
As demand for luxury apartments increases, so does supply. Every year, developers announce new luxury real estate projects in Accra.
If demand doesn’t keep up, there’ll soon be too many similar properties vying for the few buyers. That could force prices down, making it easier to enter.
But that’ll also reduce the many other benefits you could enjoy as an investor.
Also, the value of your luxury apartment may not appreciate as fast. If you were looking at the buy-to-let model, the asking rent would drop due to the increased supply.
It takes long for developers to complete a project. But in the medium term, an increased supply of luxury apartments in Accra is a potential risk.
While we’re focusing on luxury apartments in Accra, you can’t look at the overall real estate market in Ghana. It’s okay to harbor concerns about how much growing it needs.
For example, property documentation processes are still not the fastest. Also, we still need tons of market insights to accurately forecast returns and the effects of risk profiles on these returns.
And the mortgage market is still in its nascent stages. Property financing costs are perennially too high, perhaps a reflection of the many other risks in the industry.
You can’t not think deeply about these factors if you want to invest in the luxury apartment market in Accra. Of course, it’ll all depend on your level of investment – buyer or developer, for example.
If you’re a real estate investor, it’s time to consider the luxury real estate space in Accra, Ghana. With a growing middle class and a developing economy that’ll only attract more investment in the future, the prospects are too promising to overlook.
If you’re willing to overlook these risks – or at least adjust your expected returns to cater to them – the luxury apartment space in Accra is worth your dollars.