Surveying & Built Environment Vol. 22 Issue 1 (December 2012)

SBE
46
Good Property Valuation in Emerging Real Estate Markets? Evidence from Ghana
usually by private valuers. The method
works by capitalising the income from
the farm at a particular yield over a
period of time. So, in a palm plantation,
for example, the annual income from
the palm fruits and the annual market
value of the trees would be estimated
by drawing on market information
collected from the Ministry of Food
and Agriculture or directly from food
markets. With a suitable yield, the total
annual income from the farm would be
capitalised for the term of the farm to
arrive at its market value.
Finally, the Market Approach – not
Cost Approach - is usually used in
the valuation of properties in newly
developed estates, such as those in
Hydraform Estates, Regimmanuel
Estates, Coastal Estates and Ayensu
River Estates in the Accra-Tema area.
Houses from these companies may sell
between $30,000 and over $300,000
depending, inter alia, on location,
finishes, number of rooms, and size (see
Karley, 2009 and Grant, 2009 for more
detailed discussion). In this scenario,
valuers obtain relevant information
from the estate developers about market
values of the units which they have
developed. A related scenario is when
valuers are called upon to assess the
value of properties which are sold by
quasi state departments such as the
Tema Development Corporation (TDC)
and the Social Security and National
Insurance Trust (SSNIT). As with estate
housing, it is fairly straightforward
to ascertain the market value of such
properties by consulting with the real
estate departments of TDC and SSNIT.
If there is so much information about
these properties, why is the use of
the Cost Approach so pervasive in
Ghana? Most landed properties in
Ghana do not have the features of
those just described. Most are built
incrementally by individuals, rather
than by estate developers (Tipple et
al., 1997; Tipple and Korboe, 1998;
Tipple, 1999; Tipple and Speak, 2009).
According to the Bank of Ghana (2007),
members of the Ghana Real Estate
Developers Association (GREDA)
have constructed an estimated 10,954
houses, constituting less than 1 per cent
of the housing stock in Ghana. Thus,
it is only in a few cases that the flow of
market information is unimpeded.
In the majority of cases, there is severe
information asymmetry. Limited
information is characteristic of land
markets everywhere, of course. It arises
inter alia because every parcel of land is
different by reason of location and most
property transactions do not neatly fit
any one property sub-market (Johnson
et al., 2000, pp.1-11). However, apart
from these commonplace features of
land and property markets, there are
other factors that are peculiar to Ghana.
One is the prevalence of cultural norms.
Transactions in land and property
are often shrouded in secrecy. Some
people equate the sale of houses with
being indebted, the rationale behind
the forced sale of houses. Therefore,
to avoid being labelled ‘financially
bankrupt’, those who sell their houses
do so ‘undercover’, leading to a
situation where most land transactions
are not formally recorded (Antwi and
Adams, 2003). In a recent survey on
how people buy or build houses in
Ghana, Grant (2009, p.83) notes:
..these are sensitive questions in
any housing environment, and
particularly so in Ghana because
of cultural norms. Twenty-five
percent of respondents …did not