Jordan’s property prices stable, despite weak demand
June 20, 2017
Residential property prices in Jordan have remained largely stable throughout 2016 but property transactions have noticeably declined, according to UAE-based property management firm, Asteco.
In Amman's major districts:
- In Abdoun, the capital city's most affluent area, apartment prices rose by 2% y-o-y in 2016, to an average of JOD1,375 (US$1,938) per square metre (sq. m), according to Asteco.
- In 4th Circle, the average apartment price increased 1% y-o-y to JOD1,325 (US$1,867) per sq. m. last year.
- In Sweifieh, the average apartment price was unchanged in 2016 from a year earlier, at JOD1,188 (US$1,674) per sq. m.
- In Um-Othainah, the average apartment was unchanged in 2016 from a year earlier, at JOD1,250 (US$1,762) per sq. m.
- In Al-Rabiah, apartment prices were also stable at an average of JOD1,100 (US$1,550) per sq. m.
- In Der Ghabar, the average apartment price was also unchanged at JOD1,200 (US$1,691) per sq. m.
Property demand remains weak. In Q1 2017, real estate transactions were down 6% from the same period last year, according to Jordan-based news agency Petra.
There were about 632 properties purchased by foreign investors in Q1 2017, far lower than the 954 transactions recorded in the same period last year. Apartment sales represented about 76% of the total transactions while the remaining 24% were for land sales.
Iraqis accounted for most investments, at JOD31.7 million (US$44.7 billion), followed by Saudis (JOD30.5 million or US$43 million), Lebanese (JOD5.7 million or US$8 million) and Syrians (JOD5.2 million or US$7.3 million).
To stimulate the housing market, the government has recently introduced tax saving measures.
"The new initiative, which waives the registration fee for the first 150 square metres of any home smaller than 180 square metres is feeding the trend for buyers looking for smaller units that are competitively-priced, especially in the densely-populated capital city, Amman," said John Stevens of Asteco.
Property developers remain upbeat that the housing market will improve this year, as evidenced by the continued construction of some residential and mixed developments. One such is Al Abdalli, a mixed-use development in Amman with residential, office, retail, and hotel components over a total area of 2 million square metres.
Loans to the construction industry have been rising. In March 2017, the total amount of credit to construction surged 16% to JOD6.15 billion (US$8.66 billion) over the same period last year, according to the Central Bank of Jordan.
"It is hoped that the climate will improve in 2017 as the economy continues to grow and new developments come online to deepen the breadth of choice," added Stevens.
The economy grew by 2.1% in 2016, the lowest growth in two decades, according to the IMF. The chaos in neighboring countries such as Syria is hurtingJordan's exports, tourism, and overall economic performance. The economy is projected to expand by a modest 2.3% this year and by another 2.5% in 2018.
Foreigners are allowed to buy property in Jordan, provided Jordan and the buyer's country of residence have a reciprocal relationship, and that the approval of the Cabinet (Council of Ministers) is obtained. Foreigners can only sell the property five years after acquisition. Most properties for rent and for sale can be found in Amman, Jordan's capital city.
Good rental yields; rising rents
Gross rental yields in the capital are good at 6.3%-8.2%, according to a research conducted by Global Property Guide in September 2016. Smaller-sized apartments have higher yields than larger counterparts.
Apartment rents in Amman rose by a moderate 3% in 2016 from a year earlier, according to Asteco. Quarter-on-quarter, apartments rents in the capital increased 1% in Q4 2016.
Abdoun and Der Ghabar areas saw the biggest y-o-y rise of 6% in 2016, mainly due to the strong demand for good quality apartments. Modest to minimal rent increases were recorded in Sweifieh (3%), Um-Othainah (3%), Al-Rabiah (1%), and 4th Circle (1%).
Rental rates in Amman are rather high, due no doubt to the large number of refugees who have poured into the country.
Abdoun, Amman's most affluent district, had the most expensive housing, with one-bedroom apartments offered for rent for JOD5,500 (US$7,751) per year, two-bedroom apartments for JOD10,500 (US$14,798), and three-bedroom apartments for JOD19,250 (US$27,130).
APARTMENT RENTS IN AMMAN, 2016
|District||Average rent per annum (JOD)||Q-O-Q change||Y-O-Y change|
Refugee population impacting local property market
The conflict in neighboring Syria has meant an influx of as many as 1.5 million Syrian refugees since 2011, compounded by large Palestinian and Iraqi refugee populations present even before the Syrian civil war. Mafraq Governorate, for example, had 154,655 refugees registered in its territory - equivalent to around half of its population as of the last census. The Zaatari refugee camp has evolved into the governorate's largest city.
When registered refugees are added to the number of Syrian nationals residing in Jordan, the proportion could be as high as 21% of the population, according to Deputy Prime Minister Nasser Judeh.
According to a recent report by REACH Resource Centre, prices of rented accommodation jumped 200-300% versus pre-crisis levels in some areas.
An additional 86,000 housing units were needed to meet immediate demand, compared to 32,000 units under more normal circumstances, according to REACH.
In Q1 2017, there were about 632 real estate sales to non-Jordanians, down from 954 transactions in the same period last year. Of which, 479 transactions were for apartments while the rest were for land, at an estimated value of JOD88.7 million (US$125.1 million), according to the local newspaper Petra. Topping the list were Iraqis, with 36% of the total volume of foreign purchases, followed by the Saudis (34%), Lebanese (6%), and Syrians (6%).
Jordan in dire need of affordable housing
Refugees and native Jordanians cite housing as their area of greatest concern, as well as their largest monthly expenditure. All efforts are therefore concentrated on providing housing for Jordanians and refugees alike, and helping low-income households access affordable housing.
Royal efforts have failed in the past. In 2005, King Abdallah II kicked off the "Decent Housing for a Decent Life" campaign, which aimed to provide 120,000 affordable homes for low-income Jordanians over five years. The campaign was later abandoned, as most dwellings ended up built in rural areas, far from job opportunities.
From 2004-2011, some 28,600 housing units per year were built, against an increase in demand of about 32,000 per year, but were concentrated in the mid to upper end of the real estate market, exacerbating the shortage of affordable housing.
Attracting more private investment in affordable housing may thus require broader incentive schemes and loosening of restrictions on housing construction.
Presently, the Housing and Urban Development Corporation (HUDC), a government body responsible for the kingdom's general housing policy, in cooperation with UNHCR and several NGOs focus on four forms of intervention: cash-for-rent grants, construction of new units, winterization and upgrading of existing homes, and housing and property rights legal education.
The UNHCR and the International Catholic Migration Commission and Caritas are the primary distributors of cash for rent aid. While shelter upgrading is central to the plans of the Norwegian Refugee Council, the Jordan Health Aid Society, Medair, the Lutheran World Federation and Première Urgence-Aid Médicale Internationale (PU-AMI).
Regional traumas impinging on growth
Jordan's economy grew by 2.1% in 2016, the lowest level in two decades, as the chaos in Syria and Iraq adversely impacted the country's exports, tourism, and overall economic performance.
To jumpstart the economy, His Majesty King Abdullah recently unveiled an ambitious economic stimulus plan (2018-2022) that includes reforms in various sectors, numerous projects worth JOD6.9 billion (US$9.7 billion) and private sector investment opportunities amounting to JOD9.5 billion (US$13.4 billion). The plan also aims to generate jobs and develop human resources.
The economy is projected to expand by a modest 2.3% this year and by another 2.5% in 2018, according to the IMF.
The IMF approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Jordan in August 2016 for an amount equivalent to US$723 million, on condition that the government reduces public debt as a percent of GDP from 93% currently to 80% by 2021.
"Public debt needs to be put on a downward path through gradual fiscal consolidation over the medium term while preserving essential social spending," the IMF noted.
The public sector deficit fell from 7.1% of GDP in 2015 to 3.8% of GDP in 2016, thanks to the strong improvement in the performance of the National Electric Power Company (NEPCO) and in the central government's primary balance.However due to weak economic growth, the country's public debt to GDP ratio increased to 95.1% last year.
Unemployment is rising. In 2016, nationwide unemployment rate stood at 15.8%, up from 13.6% in 2015 and 12.3% in 2012.
Inflation in 2016 was -0.8%, owing to a decline in food and fuel-related prices. The IMF expects it to increase to 2.3% this year and to 2.5% in 2018.
Excessive bureaucracy, red tape thwart housing market growth
Excessive bureaucracy and irrational regulations keep Amman under-housed - and the poor, the middle class, and the refugees suffer. Around 42% of the country's population of 9.5 million people reside in Amman.
|Population||% of Total|
|Source: Census Data|
Despite the huge demand for land and residential buildings in Amman, new housing developments in the capital are being squeezed by high land prices, according to Jordanian Housing Developers Association (JHDA) president Kamal Awamleh. Furthermore, the Greater Amman Municipality (GAM), which oversees private and public construction, is rife with red tape.
"The real estate sector witnessed a slowdown due to GAM's measures," said Awamleh. He pointed out that GAM imposes strict restrictions and procedures significantly limiting investments in the capital. These included time-consuming paperwork and long delays in connecting new buildings to utilities, such as water, electricity and sewage. In Jordan, a housing project must undergo 17 different official procedures all in all - while in the Arab region's most bureaucratic countries, the average reaches only up to 9.
Housing investor Mohammad Amin agrees, saying the sector suffers from "over-complicated bureaucratic" procedures, especially in issuing occupancy permits. "We are usually out of liquidity once a complex is built, and we need quick procedures to pay banks, workers and contractors," he said.
Apart from drawn-out procedures, GAM also restricts the number of flats in each building. "Developers want to construct buildings with 15 smaller apartments but GAM forces them to build only ten," says Awamleh. This has resulted in larger and less affordable apartments that are basically inaccessible to the majority of Jordanians.
Furthermore, GAM also imposes height restrictions on construction, capping residential buildings at four stories and, in some areas, at two floors plus a roof above street level. Amin contends that restrictions should be abolished as unit size specifications should be subject to supply and demand.
In 2014-2015, total licensed apartments did not exceed 25,000 while the actual need was estimated at 43,000 apartments. Today, the gap may be much larger as "estimates put the market's current need for apartments at around 60,000 units, taking into consideration that Jordan needs some 5,000 apartments every month," according to Nidal Daoud, JHDA council member.
Red tape has become so problematic that the JHDA called on investors to suspend buying real estate and freeze their transactions with GAM for a month in 2015. This should prove the sector's major impact on the municipality and the national economy, according to Awamleh.
He warned that housing developers could relocate to other countries, including the United Arab Emirates, Turkey, Egypt and Morocco due to simpler procedures and stable investment laws. In fact, hundreds of housing companies have left the market in recent years.
GAM, on the other hand, asserts that any delays are due to disputes or failures to meet the official standards. Procedures should only take 12 days maximum if the building license transaction meets terms and conditions. Normally, around 80-85% of transactions are approved.