D. Owusu-Manu, E.A. Pärn, K. Donkor-Hyiaman, D.J. Edwards and K. Blackhurst
The purpose of this study is to explore the mortgage affordability problem in Ghana, an issue that has been associated inter alia with high mortgage rates, which results from the…
Abstract
Purpose
The purpose of this study is to explore the mortgage affordability problem in Ghana, an issue that has been associated inter alia with high mortgage rates, which results from the high cost of capital, an unstable macroeconomy and unfavourable borrowers’ characteristics. Concurrent improvements in both the macroeconomy and borrowers’ characteristics have rendered the identification of the most problematic mortgage pricing determinant difficult, consequently making the targeting of policy interventions problematic.
Design/methodology/approach
This research sought to resolve this aforementioned difficulty by providing empirical evidence on the relative importance of mortgage pricing determinants. A data set of mortgage rates of selected Ghanaian banking financial institutions from 2003 to 2013 was examined and analysed by applying Fisher’s model of interest rates and an ex post analysis of the standard regression coefficients.
Findings
The risk premium factor emerged as the most important determinant in Ghana compared with the inflation premium and the real risk-free rate, although all are statistically significant and strongly correlated with mortgage rates.
Originality/value
This study provides an insight on the relative importance of mortgage pricing determinates and subsequent macro-economic guidance to support policy interventions which could reduce mortgage rates/enhance mortgage affordability. The paper specifically aims to engender wider debate and provide guidance to the Ghanaian Government and/or private enterprises that seek to provide affordable mortgages. Further research is proposed which could explore ways of reducing mortgage rates as a means of engendering social equality and adopt innovative international best practice that has already been tried and tested in countries such as South Africa and the USA.
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Sampa Chisumbe, Clinton Ohis Aigbavboa, Erastus Mwanaumo and Wellington Didibhuku Thwala
Francis Kwesi Bondinuba, Alex Opoku, Degraft Owusu-Manu and Kenneth Appiah Donkor-Hyiaman
The emergence of housing microfinance (HMF) as a response to the low-income groups’ inability to access traditional housing finance is an innovative strategy by creative…
Abstract
Purpose
The emergence of housing microfinance (HMF) as a response to the low-income groups’ inability to access traditional housing finance is an innovative strategy by creative Microfinance Institutions. Yet, low-income groups’ still face barriers in accessing these innovative products, particularly in Ghana. This paper aims to examine the critical demand barriers and how to develop and improve the design and delivery of HMF interventions in the low-income housing market in Ghana.
Design/methodology/approach
The paper achieves its aim by adopting a focus-group discussion strategy to examine the constraints to the demand for HMF among low-income groups’ in Ghana.
Findings
Nine factors constrained the design, delivery and demand for HMF – affordability issues; risk; land tenure insecurity; high interest rate; collateralization and insurance challenges; unfavourable HMF loan conditions; lack of social capital; high cost of land and building materials; and ineffective consumer protection.
Research limitations/implications
Although limited to low-income groups, strategies to stimulate demand for HMF should focus on three broad problems – affordability, macroeconomic management and institutional development and government intervention.
Social implications
The paper makes significant contributions to the body of knowledge, regarding understanding the low-income housing market and its financing in the context of a developing country.
Originality/value
The novelty of the paper is founded on the premise of the research methodology adopted to unearthed the barriers to the demand of HMF in Ghana. Future research effort should be directed at exploring the motivations behind low-income groups’ decision to demand HMF and the risk associated with the use of HMF in the context of Ghana.
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Sampa Chisumbe, Clinton Ohis Aigbavboa, Erastus Mwanaumo and Wellington Didibhuku Thwala
Richmond Juvenile Ehwi, Lewis Abedi Asante and Emmanuel Kofi Gavu
In Ghana, the practice of landlords demanding that renters pay rent advance (RA) of between six months and five years is well noted. Surprisingly, renters appear divided into the…
Abstract
Purpose
In Ghana, the practice of landlords demanding that renters pay rent advance (RA) of between six months and five years is well noted. Surprisingly, renters appear divided into the benefits and drawbacks of the rent advance payment. Ahead of the 2020 general elections, the two leading political parties in Ghana promised to establish a rent assistance scheme to help renters working in the formal and informal sectors and earning regular incomes to pay their RA. This paper aims to scrutinize the differences in the demographic, employment and housing characteristics between the critics and non-critics of the RA payment in Ghana and the factors that predict the likelihood of being a critic of the RA system.
Design/methodology/approach
The study is exploratory and draws empirical data from surveys administered to 327 graduate renters from 13 regions in Ghana. It uses non-parametric and parametric tests, namely, Chi-square goodness-of-fit and T-test to explore these differences between both critics and non-critics of the RA.
Findings
There are statistically significant differences between critics and non-critics in terms of the association between their educational attainment on the one hand and their marital status, employment status and employment sector on the other hand. The research also reveals that monthly expenditures, number of bedrooms and RA period significantly predict the likelihood of being a critic of the RA payment or otherwise.
Practical implications
The study provides evidence which policymakers can draw upon to inform housing policy.
Originality/value
The study is the first to study the housing characteristics of graduate renters and to quantitatively distinguish between critics and non-critics of RA payment in Ghana.
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Sampa Chisumbe, Clinton Ohis Aigbavboa, Erastus Mwanaumo and Wellington Didibhuku Thwala
Kenneth Appiah Donkor-Hyiaman and Kenneth Nii Okai Ghartey
This study aims to examine why Ghana has English legal origins (hypothesised as a legal framework that promotes financial development) but has not developed a well-functioning…
Abstract
Purpose
This study aims to examine why Ghana has English legal origins (hypothesised as a legal framework that promotes financial development) but has not developed a well-functioning mortgage finance market.
Design/methodology/approach
The authors adopt the institutional autopsy approach developed by Milhaupt and Pistor (2008). This study is not a cross-country study but a historical examination of Ghana’s mortgage finance regulatory framework. The institutional autopsy framework considers the iterative process of change in a system and allows for context-specific system analysis.
Findings
The authors note that for a long period of about 68 years (1940-2008), some of the legal rules regulating mortgage finance were not typical of the hypothesised characteristics of the English common law tradition. These rules, including, interest rate controls, excessive entry barriers, loan default guarantee discriminations and complex foreclosure procedures, tended to inadequately protect creditors. In the context of the history of military rule and law-making, judicial discretion that could have promoted legal efficiency and strengthened contract enforcement was also limited. During this period, the legal system demonstrated a concentrated and coordinative character. New legislation in the form of the Home Mortgage Finance Act 2008 (Act 770) attempts to resolve some of these bottlenecks and improve creditor rights protection.
Research limitations/implications
The study focuses solely on how the legal institution affects creditor protection and mortgage finance in Ghana.
Practical implications
Policy-wise, the study deepens the understanding of the channels through which the law affects the development of mortgage finance.
Originality/value
To the best of the authors’ knowledge, the methodology used (institutional autopsy) is novel in the context of analysing mortgage finance.
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Hassan Gholipour Fereidouni and Reza Tajaddini
This paper aims to investigate whether cultural dimension of power distance, which is the extent that inequality is expected and accepted in societies, can explain underlying…
Abstract
Purpose
This paper aims to investigate whether cultural dimension of power distance, which is the extent that inequality is expected and accepted in societies, can explain underlying differences in landlord-tenant practices (LTP) across countries.
Design/methodology/approach
The authors use a sample covering countries from different regions. They apply the ordered probit regressions to estimate the relationships between the explanatory variables and LTP.
Findings
The results show that hierarchical societies demonstrate more pro-landlord practices. This finding is robust to alternative measures of power distance and different sample sizes. In addition, the authors find that countries with larger rental sectors and larger numbers of landlords with mortgages demonstrate more pro-tenant practices. The results also show that differences in LTP across countries are not significantly influenced by legal origin.
Originality/value
To the best of the authors’ knowledge, very limited studies have investigated the determinants of LTP across countries. In addition, while cultural values such as power distance have been used to explain the economic, social and financial variables, less, if any, number of studies have used them to explain the variation of real estate market variables such as LTP.
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DeGraft Owusu-Manu, David John Edwards, Erika Anneli Pärn, Richard Ohene Asiedu and Alex Aboagye
While mortgage markets have gradually emerged in many African countries, substantial barriers still hinder their growth and expansion. Affordability has been widely cited as a…
Abstract
Purpose
While mortgage markets have gradually emerged in many African countries, substantial barriers still hinder their growth and expansion. Affordability has been widely cited as a prominent issue that doggedly remains at the core of urban housing problems. Hence, this paper aims to investigate the determinants of mortgage price affordability.
Design/methodology/approach
Data were gathered using semi-structured questionnaires obtained from a sample drawn from three major West African mortgage financing institutions. Respondents rated the variables using a five-point Likert item rating. The survey results were analysed using exploratory factor analysis.
Findings
In total, 11 variables that influence mortgage affordability were categorised within five principal components, namely, economic factors, financial factors, property characteristics, developmental factors and geographical factors.
Practical implications
The results provide insightful guidance to policymakers and practitioners on how to mitigate affordability issues within Ghana’s fledgling mortgage market. Failure to address the mortgage price affordability conundrum will place enormous pressure upon social housing and rental accommodation.
Originality/value
The research findings expand existing frontiers of knowledge by investigating and reporting upon the determinants of mortgage price affordability. The work also engenders wider debate on the need to establish mortgage packages targeted at low-to-middle-income earners. The culmination of analysis and debate will provide a robust basis for developing a future housing policy framework.
Kenneth Appiah Donkor-Hyiaman and DeGraft Owusu-Manu
Most households in Sub-Saharan African cannot afford adequate housing. Most often, their pension benefits are also meagre, usually resulting from low contribution levels and…
Abstract
Purpose
Most households in Sub-Saharan African cannot afford adequate housing. Most often, their pension benefits are also meagre, usually resulting from low contribution levels and mismanagement. Coupled with low life expectancies, most would not live to enjoy the benefits of pensions, thus validating the need to utilize their hitherto deferred pension benefits for immediate housing investment and consumption.
Design/methodology/approach
Quantitative research methodology via the present value technique was used in valuing pension benefits to demonstrate the potential of pension schemes as savings mobilization mechanisms for long-term pension-backed housing financing in Ghana.
Findings
Policy wise, the paper provides some evidence to support proposals for the development of pension-backed housing finance systems in Ghana with lessons for Sub-Saharan Africa. The authors demonstrate that the Tier 2 defined contribution mandatory occupational pension scheme could serve the purpose of a savings mobilization mechanism for long-term housing financing. The authors observe that by increasing the Tier 2 contribution rate to 30 per cent, the majority of the sample, mainly of the middle-income class, could accumulate between US$11,000 and US$17,000 over their working life. At the same rate, between US$5,783 and US$9,550 could have been raised as savings between 2010 (when implementation began) and 2014. This could form a substantial equity contribution in a mortgage investment and or borrowed on a housing microfinance basis.
Originality/value
The paper contributes to the ongoing debate on the need to develop alternate savings mechanisms and collateral assets using pension assets, other than property, for mortgage financing. The proposals made are aimed at influencing policy by way of advocating for the use of latent pension equity to improve the housing conditions of members while they are alive, and also to suggest pension-backed housing financing as an alternative investment option. A comprehensive study would be required to settle issues of scalability, pricing and model design.