The International Monetary Fund has forecast that over the next few years, around 70 percent of world growth will come from developing countries. Economic advances in countries such as Nigeria, Indonesia, the Philippines, Saudi Arabia and Mexico will see particularly strong development in the construction, real estate, and technology sectors.

And while the outlook for more developed and mature real estate markets around the world is well documented, the property sector in the emerging world receives much less attention from both researchers and the media, notes the first Lamudi’s first annual report on the current and future state of real estate in the emerging markets. The global property portal, focused on emerging and developing countries, based its findings on a series of online surveys with both house-hunters and real estate agents across Asia, the Middle East, Africa and Latin America.

We chose to highlight four countries from Lamudi’s extensive list.

real estate, middle east, jordan, saudia arabia, indonesia, morocco
“The overall outlook for real estate in the GCC is positive. Demand is expected to increase, supported by sound economic conditions and favourable demographics e.g., young population, booming middle class. The real estate market in GCC countries is expected to also be supported by the increasing population driven by large scale events e.g., World Cup 2022 in Qatar and Expo 2020 in Dubai. Despite these promising opportunities, there remain a set of overarching challenges namely a shortage of affordable housing, limited construction financing and an under-supply of affordable land,” Khalid Al Ali, Managing Director Lamudi Saudi Arabia, told bq magazine.

Saudi Arabia – 36% of house hunters unable to buy

According to a recent survey of real estate agents in Saudi Arabia, the greatest challenges facing the local real estate market include: economic outlook, political change, price fluctuation and foreign investment. Nevertheless, 23 percent believe that there will be growth of eight to ten percent over the next year. There’s a huge opportunity driven by the high demand. KSA is lacking about two million units over the next 10 years due to the population growth.

The government is trying to tackle the growing problem, but the shared opinion of real estate professionals is its efforts are far from enough.  The Ministry of Housing is taking steps to increase development and the next five years will see the unveiling of many more projects across Saudi Arabia, intended to create both affordable and luxury housing for KSA residents.

Multiple strategies have recently been put in (albeit slow) motion, including the Ministry of Housing’s ESKAN scheme, through which 620,889 families have already been found eligible for financial aid, according to the Ministry.

Major obstacles to the construction of affordable housing are a lack of government-owned land and a lack of mortgage options available to house hunters.

According to the CBRE Group, around 50 percent of land within some cities is owned by the country’s wealthiest individuals  and – vacant.

Thus, the Ministry of Housing is considering imposing fees on vacant lands, to eradicate the monopoly on these underdeveloped plots,  due to which the state is currently forced to either buy back the land at elevated prices, or to build in the outskirts of cities.

And whilst the 2013 mortgage law will take make a significant change, many more citizens will ultimately have the chance to become homeowners.

real estate, middle east, jordan, saudia arabia, indonesia, morocco

 Speaking about the local property market change over his 35 years in the industry, Salman Ben Saedan, founder of Salman Abdullah Sin Saedan Real Estate and board member of the Tunisian Saudi Real Estate Company said:

“The real estate market started very weak, unprofessional and with no official institutions. Now it is becoming more systematic; it is still not fully organized but it is on the way and it is constantly getting better. The market is also seeing a huge increase in demand. This is largely due to high population growth. What’s more, about 60-70 percent of the population is below 20 years old, so we have a growing and very young population.”

He finds the biggest challenge for the real estate developers in Saudi Arabia them making sure they are meeting the needs of the customer, because the customer varies so much from area to area. Additionally, their financial needs change from one to another and, depending on the location, the types of houses they are after vary too. “Most customers now have fairly high expectations but low financial abilities”, Ben Saedan said.

However, investment in real estate hasn’t increased in Saudi Arabia in recent years. People are looking for something to own, to live in – not to invest. According to Lamudi data, the majority of house hunters in Saudi Arabia are currently renting their property and are searching to buy (52.1 percent) an apartment (63.8 percent).

Furthermore, 40 percent of customers searching for properties to rent do not currently wish to purchase a place of their own. The low desire to purchase property may be due to low salaries and high youth unemployment (28.3 percent), as affordability remains the main reason for renting instead of buying in the KSA, with 36.9 percent of renters surveyed by Lamudi unable to afford to buy their own property.

The majority of respondents (55.7 percent) are currently saving to buy their first property and 79.7 percent expect to purchase property within the next five to ten years.

Both buyers and renters are looking for properties in urban areas of KSA, with Jeddah the main focus for property hunters, followed by the Kingdom’s capital, Riyadh.

Lamudi’s conclusion is that the real estate market in KSA is poised for significant growth over the next decade, with many opportunities arising for developers, construction companies and real estate agents.

real estate, middle east, jordan, saudia arabia, indonesia, morocco
Currently, the residential buildings in Jordan are limited to five storeys, and investors and developers are calling for amendments, allowing seven- to ten-storey apartments to cut land costs and enable building more housing units in urban areas.

Jordan – real estate market back on its feet

Whilst Jordan’s economy may be amongst the smallest in the Middle East, it is showing encouraging growth potential, writes Lamudi in its white paper.

‘The emerging market has faced many obstacles, such as insufficient water and oil supplies, and while proximity to the unrest in Syria, and instability in neighbouring countries, may affect the speed of the country’s development, the future looks promising, as the Jordanian government turns it focus to the development of the country’s infrastructure, fighting against housing deficits and unemployment rates.

Whilst Jordan’s GDP per capita positions it as an upper middle income country, structural reforms are fundamental to the future growth of the economy.’

In the wake of the global crisis in 2008, Jordan’s property market slowed and house prices fell by an estimated 10 to 15 percent, but government was quick to respond with a property tax reduction and reforms affecting registration fees, resulting in the housing market climbing to its pre-crisis levels by 2011.

In 2013, according to reports from the Department of Land and Survey (DLS), government revenues from the real estate sector rose by 11 percent to JD 354 million. Almost 90 percent of housing units were purchased by Jordanians, with a total of 30,380 residential apartments selling over the course of the year – a 19 percent increase from 2012. Real estate trading in Jordan increased by 26 percent during the first four months of 2014, to reach JD 2.5 billion.

As everywhere in the Middle East, the demand in Jordan is strong as a result of the young population, with an average age of 22 years old; a time when many will soon be looking to purchase their first home.

real estate, middle east, jordan, saudia arabia, indonesia, morocco

80 percent of the Jordanian population lives in cities. Affordable housing is in particular demand, and according to the president of the Jordan Housing Developers Association, Kamal Awamleh, the Kingdom needs around 40,000 affordable residential units annually to solve the housing deficit.

However many development projects in the Kingdom prefer to focus on high-income earners searching for luxurious properties, and developers are only building around 25,000 apartments to cater to low-income individuals. Jordan Gate Towers, a high-class, mixed use project in Amman, and the tallest structures in the city, is currently under construction, planned to host the first Hilton Hotel to Jordan, as well as featuring executive office space, conference facilities, and retail outlets.

The second phase of the plan will see the construction of a gated residential community, offering high-class, luxury housing.  Meanwhile the Abdali project, valued at more than USD 5 billion, will modernize the Kingdom’s capital city. The largest mixed-use development in the city will consist of residential apartments, office spaces, hotels, entertainment facilities and retail outlets, across 384,000 m² of land.

One of the challenges facing real estate developers in Jordan is the increasing price of land, caused by regulations preventing vertical expansion. Currently, the residential buildings are limited to five storeys, and investors and developers are calling for amendments, allowing seven- to ten-storey apartments to cut land costs and enable building more housing units in urban areas.

With an average of 82 percent of sunshine over a year in Amman, Jordan also has a huge solar energy potential.

By the end of 2020 as much as 30 percent of Jordanian households are planned to be equipped with solar water heating systems.

The Shams Ma’an photovoltaic power plant project aims to establish Jordan as a clean energy base for technology, research and development and to attract more solar technology investors.

To protect homebuyers, the Jordan Housing Developers Association (JHDA) seeks restrictions on foreign developers’ investments in Jordan to Jordanian companies only, or to partnerships, where Jordanian investments own at least 51 percent in joint firms. The regulatory body has also called for the government to ban foreign and domestic investors from developing residential projects in Jordan, to regulate the maintenance of properties once housing developments are complete.

Morocco – open to foreign investment

In Morocco, the real estate market is considered to be one of the most active sectors and the construction industry one of the most important for the Moroccan economy. According to the International Organization for Migration, government infrastructure projects, private investment in real estate and tourism have helped to boost the construction sector, which employs over one million Moroccans.

In 2013, the residential, infrastructure and commercial construction markets collectively accounted for 84.1 percent of the construction industry’s overall value. Between 2009 and 2013, the construction industry registered a compound annual growth rate (CAGR) of 4.27 percent.

According to figures released by the BAM (BANK AL-MAGHRIB) and l’Agence Nationale de la Conservation Foncière, du Cadastre et de la Cartographie (ANCFCC), residential properties currently represent 70.8 percent of all real estate sales, with 21 percent of sales for urban land, and 8.2 percent business premises.

The Kingdom has a large and growing middle class (over 53 percent of the population), with a monthly income of around USD 350-810. Between 2007 and 2013, state employees experienced were given an increase in monthly salaries (around USD 263) and house hunters gained purchasing power, adding to the number of homeowners. However, this in turn resulted in rising house prices, causing severe problems for those seeking affordable accommodation, a lack of which means that many are forced to turn to social housing.

Fighting the housing deficit that has plagued the country – around 650,000 units, according to the Oxford Business Group, the government has been by implementing numerous policies over the past decade.

Thus social housing has become a key force in the growth of the construction and real estate activity. In January 2014, the middle-class housing initiative launched, with the aim of providing thousands of Moroccan citizens with land.

Whilst smaller cities will be the first to benefit from the construction of affordable housing, larger cities such as Fez, Agadir and Safi are expected to see new homes in 2015. According to the Housing Minister, Nabil Benabdallah, some 20,000 housing units will be constructed between January 2014 and 2016, with the government currently mobilizing thousands of hectares of available land.

Morocco’s Ministry of Habitat and Urban Planning has provided incentives for real estate developers to invest in the country’s social housing projects and the Oxford Business Group reported activity in the real estate sector is motivated by a number of mixed-use projects in country’s largest cities.

Among them a 4.5 million square meter, custom made city, being developed in Casablanca, with 2.5 million square meters for housing and 1.3 million for business and leisure activities. To cater for national and international companies looking to enter and expand into the region, and to encourage increasing investment, the expansive project will introduce Casablanca Finance City, a USD 170 million financial district. Furthermore, millions of dollars worth of luxury hotels are being constructed to meet the needs of the booming tourism industry.

real estate, middle east, jordan, saudia arabia, indonesia, morocco
Casablanca – the country’s economic capital – is the most popular location for house-hunters looking for residential property in Morocco.

While the private sector, accounting for around 85 percent of housing construction in Morocco, is, according to World Bank, reluctant to build low-income housing, as financing is not readily available, luxurious projects are booming across the country. The Tangier City Center, a new 236,000 m² commercial and residential center includes 803 apartments, two hotels – totalling 500 rooms – 10,000 square meters of office space, and a 32,000 square meter commercial area, as well as a shopping center.

Furthermore, the world renowned Hilton hotel chain is returning to Morocco to develop two luxury hotels for the project. As one of the largest real estate projects in Tangier since 2007, the project is expected to reach completion by the end of 2014.

Asked about the main challenges for the property market in Morocco, Kacem el Bouanani, Managing Director of SAABE, said that ‘On the one hand, players in the property market must agree to adjust their prices and be more reasonable by carrying out market studies, and notaries and other stakeholders must communicate more information so that people can make rational decisions. On the other hand, real estate agents must give more advice and the authorities must publish more statistics.’

El Bouanani finds the trends in buying  transactions in terms of price fairly stable. However, there have been some changes in terms of quantity. “For houses and apartments, several projects are now underway and sales will be better because the prices have been adjusted slightly.

Now the relationship between price and quality is much better. Overall, prices have increased exponentially, but since 2011 they have stagnated. In terms of business property, there is a huge supply coming onto the market, so prices are likely to decrease over the course of the next three years,” he said.

It is difficult to state the average price per square meter for a house in Morocco, because people tend to talk about a square meter of land not a square metre that’s been built upon. “For example, in Anfa the price per square meter of land is USD 2,820. Top-of-the-range villas in sought-after neighbourhoods have become so expensive that construction value is marginal compared with the real estate value. Now the value of a house is often just the value of the real estate it is built on,” explained El Bouanani.

Morocco is open and encouraging with regard to foreign investment, implementing trade agreements and structural reforms to motivate investors, states Lamudi’s paper. The Moroccan government has implemented numerous Regional Investment Centres (CRI) across the country, to speed up administration and minimize bottlenecks.

In 2013, the country attracted investment of USD 3.4 billion – a 23 percent increase from 2012 – with particular interest in the manufacturing, real estate, food processing and utility sectors. Foreigners are allowed to own real estate in Morocco, but not to purchase agricultural land. Mortgages are also available to foreign nationals, up to a maximum of 50 percent of the total purchase price. With no inheritance tax, low capital gains tax and no property tax to pay for the first five years after purchase, Morocco’s property market is attractive to foreign buyers.

A recent survey by Lamudi revealed that 93 percent of local real estate agents believe investment in real estate has increased over the past five years, with the majority naming infrastructural and economic development as the key driver.

The 2014 Baseline Profitability Index (World Bank’s Doing Business 2014 classification) revealed that Morocco is now among the top three Arab destinations for profitable investment – ranking higher than both Saudi Arabia, and Egypt. On a global scale, Morocco – ranked 42nd out of 112 countries – is positioned just behind the United Kingdom, and higher than Canada, the Netherlands and Germany.

Men and women equally drive the house-hunting process in Morocco. Lamudi’s own data shows that between May and October 2014, 53.5 percent of searches were conducted by males, with 35 percent of all sessions carried out by 25-34 year olds. According to Lamudi data, Casablanca – Morocco’s economic capital – is the most popular location for house-hunters looking for residential property, with 41 percent of all searches for this region.

Of those looking to settle down in Casablanca, 51 percent are looking for apartments. Slightly less than a quarter (21.52 percent) of searches are for properties in the capital, Rabat, whilst 16 percent are looking for Marrakech housing.

In 2014, the average price of a property in Casablanca is USD 1,873, while a large apartment in a top neighbourhood like Gauthier sells for around USD 2,172 per square meter.

The real estate market is poised for significant growth over the next decade, with many opportunities arising for developers, construction companies and real estate agents, concludes Lamudi.

real estate, middle east, jordan, saudia arabia, indonesia, morocco
About 40 percent of online house-hunters are searching for property to buy or rent within greater Jakarta, Lamudi found.

Indonesia –the property hot spot

After faring comparatively well during the global financial crisis, the Indonesian economy continues to grow, states the Lamudi report. In2013 investment realization reached record highs, increasing 27 percent on the previous year to total USD US 33 billion. The country’s top foreign investors – Singapore and Malaysia – focus on various sectors, including manufacturing, real estate and other services.

Moreover, a growing middle class of over 100 million people is expected to double by 2020 to hit 141 million people, according to a report from the Boston Consulting Group, which forecasts a new wave of consumer spending, and increased ownership rate of homes, vehicles and other goods.

Already property prices are increasing. Figures from Bank Indonesia for Q2 2014 covering 14 major cities show the residential property price index climbed 1.69 percent to hit 176.3, higher than the 1.45 percent increase recorded in the previous quarter, with the highest jump in the small house sector.

The bank’s annual residential property prices survey noted that the rising cost of construction materials, combined with higher worker salaries, were pushing up the price of houses. As a consequence, the majority of those working in the property sector remain positive about the future of Indonesia’s real estate market.

Despite all of the above, Indonesian property remains only 13 times the average wage, compared to Mumbai 15 times, or Hanoi more than 20 times, making property still affordable.

Limitations for foreign investors haven’t dampened the international property hunters’ enthusiasm for Indonesian luxury real estate sector. Jakarta has been named the world’s fastest growing luxury real estate market two years in a row. According to real estate consultancy firm Knight Frank, the city’s prime residential market grew 37.7 percent in 2013. Bali took third place, with the island’s luxury market expanding 22.2 percent year-on-year.

real estate, middle east, jordan, saudia arabia, indonesia, morocco

Currently, foreigners cannot buy real estate outright in Indonesia. Instead, they are granted a Right of Use (Hak Pakai) title that enables non-nationals to effectively lease a property from an Indonesian citizen for a period of 25 years, but with many of the same rights as if they owned the property.

Late next year, the countries in the Association of Southeast Asian Nations (ASEAN) will merge to form a single market. And with the establishment of the ASEAN Economic Community (AEC), the lawmakers across the region are expected to be pressured into allowing for greater foreign ownership of property.

Lamudi data shows an overwhelming preference for buying property among Indonesians. In urban areas, nearly three-quarters of dwellings are owner-occupied. In rural areas, the figure is even higher, with 88 percent of properties outside of cities classed as owner-occupied.

Property prices deter many from buying, at least for the time being, as owning property is a priority for Indonesians. Nearly 95 percent of renters surveyed by Lamudi were currently saving to buy a home. In fact, all renters said they expected to buy property within the next five to 10 years.

About 40 percent of online house-hunters are searching for property to buy or rent within greater Jakarta, Lamudi found.

Explaining why Indonesian property is so attractive right now, Johanes Mardjuki, Managing Director of Lamudi Indonesia, said: “Indonesian property has seen phenomenal growth after the global credit crisis. For the past three to four years the market has done very well. Interest rates have been low. Access to consumer capital has been easy, and buying power in Indonesia has increased. Today, there are more than 50 million Indonesians with more than USD 4,000 monthly salary.”

“Developers in Indonesia are conservative. We tend to watch competitor pricing, and increase gradually. We do not want a situation of oversupply. Hence, we increase our prices in line with the increase in consumer buying power. On the face of it, the growth may not seem fast but there is another perspective. When we release developments into the market, prices can change up to 10 percent from one-day to the next. Each phase we release into the market can have 2-3 percent price hike over the space of as little as a day. This is because we see demand to be strong enough to take these prices,” he further explained the surprisingly gradual climbing of property prices.

Although the government has introduced regulations on the property market that had slowed things down, such as new loan-to-value ratios and mortgage rules that have made access to funds by consumers much more difficult,  Mardjuki  sees the policies as beneficial.

However, he pointed out, some of the laws are excessive when considering the market is nowhere near a bubble. While select areas may be overpriced, such as Kebayoran, others, such as Serpong or Bintaro still hold the prices in the range of 10-15m per square metre.

Despite these positive signs for the sector, some concerns remain, noted Lamudi. Agents have highlighted issues surrounding the growing housing backlog, particularly in Jakarta and Surabaya. The government has previously estimated that the backlog could be as high as 15 million units. Infrastructure development will play a central role, as this would encourage developers to build in new growth areas to help address the shortfall, the report concludes.

NO COMMENTS

LEAVE A REPLY