Analysing the Affordability of Housing in Ghana

Analysis of Affordability Thresholds

According to the GSS, more than 80% of public sector
workers earn less than GHS 3,000 (US$ 251) per month as of February 2023.
Extrapolating this statistic for the average income of Ghanaians, we have for
the purpose of this analysis, peg average earnings from all sources at GHS
3,000 (US$ 251). Affordability of housing is best considered on a household
basis, using the average household size of 3.6.

According to the United Nations, a household is a small group of persons who share the same living accommodation, who pool some or all of their income and wealth, and who consume certain types of goods and services collectively, mainly housing and food.  Thus, assuming a minimum household of two (husband and wife) in the working class, the average annual household income using the same base individual income of GHS 3,000 (US$ 251) as above is estimated at GHS 72,000.00 (US$ 6,013) per annum. Also, for this analysis, we employ the popular 50/30/20 rule which indicates that 50% of household income is spent on essential expenses such as rent, utilities, and groceries, 30% of the income caters for non-essential purchases and wants, and 20% put into a savings account. Referencing this general rule of thumb using GHS 72,000 (US$ 6,013) as the average annual household income, it may be implied that the average household can save at most GHS 1,200 (US$ 100) monthly and GHS 14,400 (1,203) annually towards acquiring a home assuming all savings are channeled toward home purchase. As an analytical safety net of prudence in favour of affordability, we assume a further 30% scale-up of annual savings / disposable incomes per annum for home purchase to GHS 18,720 (US$ 1,563).

Thus, keeping inflation and other price and wage adjustments constant, the total save-up period to purchase a standard 2-bedroom valued at GHS 500,000 (US$41,757) is estimated at approximately 27 years going through the equity
purchase route.