Academic journal article Journal of Real Estate Literature

International Articles: Measures of Real Estate Values from Land Registration and Valuation Systems in Emerging Economies: The Case of Ghana

Academic journal article Journal of Real Estate Literature

International Articles: Measures of Real Estate Values from Land Registration and Valuation Systems in Emerging Economies: The Case of Ghana

Article excerpt


This paper investigates the applicability of the hedonic approach for creating indices of residential real estate values from state land registration and valuation systems in Ghana, Africa. Using data on 2,950 transactions from five classified locations in Accra and Tema for 1992-2005, sale prices are modeled, first, for the aggregate sample, before segmenting the market on the basis of two sub-periods (1992-1998 and 1999-2005) and three price bands. A series of continuous and categorical dummy variables are included in the model to construct a residential real estate index. The main conclusion is that heterogeneous real estate characteristics such as the number of bedrooms, number of stories, real estate size and type, quality of landscaping, plot size, security of tenure, and location are all significant variables that influence real estate prices in Ghana.

Formal commercial real estate markets - modern residential, retail and office space leased on well-defined contracts that are registered, and demanding large amounts of development capital - are in an early state of development in many African countries. These nascent investment markets have received little attention from researchers and policy-makers, in contrast to the large volume of work on the foundation stages of real estate markets, such as land rights issues and land registration. The role of formal real estate investment markets in the process of economic development therefore remains poorly understood. The lack of understanding is, in part, a direct result of the absence of reliable information on real estate values, yields, and total returns. Adair, Berry, and McGreal (2004), commenting on the real estate investment markets in transitional East European economies, point out that "data transparency is a key characteristic of a mature market, and markets that are able to demonstrate that they possess such data have a competitive advantage and are more likely to attract private sector investment funds." Indicators of real estate transparency produced by international real estate advisors (e.g., Jones Lang LaSalle, 2004) also emphasize the importance of market data and benchmarks of investment return in creating efficient capital markets.

This paper explores the feasibility of constructing an index of investment values based on real estate transaction records held by the Ghana Land Valuation Board. It uses data covering the period 1992 to 2005, and employs hedonic modeling methods to extract estimates of market movement from heterogeneous transactions evidence. The study is intended to provide a basis for the first Ghana "Real Estate Index." Given the existence of land registration systems similar to that in Ghana in other emerging economies, the approach may be more widely applicable.

Following this introduction, the paper is organized in four sections. Section 2 is a short profile of the Ghanaian economy and previous research on its real estate markets. Section 3 sets out the data and methodology used in this study, with results in Section 4. Section 5 concludes, and discusses further developments of the research.

Ghana and its Real Estate Markets

Ghana is a West African country, with a population of 2 1 million (Ghana Statistical Service, 2005), bounded by the Gulf of Guinea to the south, Cote d'Ivoire to the west, Burkina Faso to the north, and Togo to the east. It was the first Sub-Saharan colony to gain independence from Britain in 1957. From 1966 to 1992, the country was politically and economically unstable with a long series of coups. Constitutional reforms in 1992 have been followed by a period of stable multi-party democratic governance.

Over the last decade, the economy has seen fairly steady progress. Real GDP growth has been sustained each year close to an average rate of 4.7% per year, rising to over 5% in each of the last four years. Inflation, though still at 1 1% in 2006, has become less volatile and shows a downward trend in recent years. …

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