Can Your Salary Afford You A House?
There is a fundamental disparity between the property many Ghanaians try to build or acquire, and those they can actually afford, home financing experts say.
According to them, Ghanaians need not find themselves priced out of the property market if they are prepared to start young with low-priced starter homes.
If people are building or buying a home, many want it to be their 'dream” house from the start, 'but often their salary just doesn't support their plans,” says Kojo Addo-Kufuor, Chief Operating Officer of Ghana Home Loans.
Buying a house with a mortgage for $10,000 when you are 25 or 30, perhaps jointly with a spouse, friend or family member, should be seen as a, “pension, long-term saving and accommodation, all in one,” says Mr Addo-Kufuor.
But how many years of a public sector worker's earnings can afford him a house, when a detailed look at the salary structure of a young graduate in the civil service may not give him or her start in life, after taking care of accommodation, utilities and family commitments.
For example, a graduate working in the civil service for three years placed on level 15, may be earning between the range of GH¢560.00 and GH¢600.00 monthly depending on where one works after SSNIT and income tax deductions. This works up to GH¢6961.00 gross per annum.
Up the ranks, a Principal Co-ordinator, who has worked for three years in the civil or public service placed on level 18 rankings may be taking home a monthly salary of between GH¢820 to GH¢850.00 after SSNIT and income tax deductions. This puts his or her annual gross at GH¢10.529.00.
The rank of a director placed on level 20 salary scale and on step three in the civil or public service may be earning between GH¢1.100 and GH¢1.150.00 after SSF and income tax deductions or an annual gross of GH¢12,949.000.
This means that for young graduates to start dreaming of owning their homes they have to start early adjustments in lifeclass at the start of a career and mindful of what at the end of the month, a scale of preference could be a guide.
For a country still aspiring, rather equivocally, to reach an average per capita income of $1,000 a year by 2015, family houses in central Accra are typically going for around 100-times that figure, pricing all but the very rich out of the property market entirely.
Even the modest houses in Accra area are becoming increasingly unaffordable, on a price-to-income ratio – and houses further out of the centre are appreciating rapidly.
Further out of town and you might find something in the $40,000 to $50,000 range for a two or three bedroom house – but with road networks and traffic problems as they are, the headache and expense of the daily commute into the centre is one of the reasons why the clamour for houses in town continues unabated.
Reluctance to take a mortgage or loan is another barrier for many would-be home owners: what the Ghanaian market has not yet learned to do is to see property itself as a financial asset and a means of saving, says Kojo Addo-Kufuor of Ghana Home Loans.
Mortgage re-payments may seem expensive, but if taken out against a house within your range, they can be an effective way of saving up valuable property equity for the future.
For a $20,000 loan from Ghana Home Loans, for example, monthly repayments would be $245 or GH¢260. A couple with a joint income of around GH¢500 would be eligible to apply.
For a three bedroom house in the outskirts of Accra worth GH¢47,000.00, an implied mortgage from Home Finance Company would be GH¢34,533 constituting 70 per cent of the cost of the house whilst the client deposits upfront the 30 per cent cost before a mortgage is extended.
Based on the salary structure earlier indicated, a young graduate who has just been recruited into the civil or public service, earning a monthly salary of GH¢560.00 will take a little over 25 years to repay the mortgage.
But Mr Addo-Kufuor says “Studies have shown that the typical Ghanaian will have a substantial salary increase every two years, and a change in status (such as a new job or a promotion) every five years.”
Based on this premise, customers are able to increase their mortgage re-payments as their income increases and make only a minimum payment in years when income is stagnant.