The Macro-Economy and Housing Credit Market in Ghana

Abstract

The housing finance market of Ghana is underdeveloped. A number of
studies have suggested that the weak and unstable macro-economic
environment in the country is responsible for this. These studies however,
showed the relationship between the country’s mortgage market and the
macro-economy through qualitative techniques. This paper, examines this
relationship via regression models. It regressed mortgage originations in the country on inflation, interest, and exchange rates to determine their impacts on mortgage market activities. It found out that the only significant factor influencing mortgage origination in the country is the exchange rate. It suggests that this exists because mortgages in Ghana are denominated in foreign currencies notably the United States dollar and that mortgagees focus on Ghanaian residents abroad or Ghanaians with foreign currency denominated income. It notes that resident Ghanaians have been priced out of the mortgage market by high exchange rate levels and the “dollalization” of mortgages in the country. It recommends that policy must focus on addressing the exchange rate problem in other to make the mortgage market attractive to both mortgagees and resident Ghanaians.

Key Words: Mortgage originations, Macroeconomic Factors, Housing
Credit, Ghana