Morocco’s housing market is slowing
Lalaine C. Delmendo | July 17, 2021
Morocco’s housing market is cooling sharply, amidst slowing economic growth. Property prices are now falling gradually. Transactions are plummeting. And, the mortgage market is continuously shrinking.
During 2019 the nationwide residential real estate price index (REPI) fell by 0.6%, in contrast to a 0.8% growth a year earlier, according to Morocco’s central bank Bank Al-Maghrib.
By property type:
- House prices fell by 1.4% y-o-y in 2019.
- Apartment prices droppedslightly by 0.5% y-o-y in 2019.
- Villa prices fell by 3.5% last year.
REAL ESTATE PRICE INDEX (REPI), Q4 2019
|Property type||Annual change (%)||Quarterly change (%)|
|Source: Bank Al-Maghrib|
- In Rabat average property prices fell by 1.5%, following a 3.5% increase in 2018.
- In Casablanca property prices fell slightly by 0.4%
- In Marrakesh property prices dropped 0.2%.
- In Tangier property prices also stagnated last year.
Likewise, urban land prices fell by 0.9% y-o-y in 2019, after an annul decline of 2.4% in 2018 and rises of 1.8% in 2017 and 6% in 2016.
Demand has been depressed with the total number of residential transactions falling by 10.5% in Q4 2019, in sharp contrast to a 16% increase the previous year, according to Bank Al-Maghrib.
The previous decadeMorocco’s property market surged, on the back of high-GDP growth during the years 2001 (GDP growth of 7.3%), 2003 (6%), 2006 (7.6%), 2008 (5.9%) and 2011 (5.2%).
During 2019, Morocco’s economy grew by a modest 2.3%, a slowdown from annual growth of 3% in 2018 and 4.2% in 2017. Recently Bank Al-Maghrib revised down its economic growth forecast this year to 2.3%, from the earlier projection of 3.8%, mainly due to the adverse impact of the COVID-19 outbreak.
Bank Al-Maghrib emphasized that these forecasts “remain surrounded by significant uncertainties and are subject to downward revision if the global spread of the Covid-19 disease is not contained in the short term.” The pandemic has prompted the Moroccan government to suspend all international flights and close mosques, schools, restaurants, cafes, and other non-essential shops.
There are no restrictions on foreigners’ owning land in Morocco, except for areas designated for agricultural purposes. The Dirham, Morocco´s currency, is relatively stable.
Based on Global Property Guide research, riad prices in Marrakech have fallen in recent years to around US$2,400 per sq. m., as compared to the US$3,000 or sometimes up to US$4,000 per sq. m. in mid-2009. Riads now cost between US$200,000 to US$1 million, depending on size. A 500 sq m. riad, which might then have sold for the equivalent of US$1.5 million, would now fetch US$1.2 million. Older riads are offered in the market for US$200,000 or even less.
Riads are traditionally-shaped Moroccan houses, with grand salons giving onto a central tiled courtyard, often with a garden at the center. Previously, the majority of riad buyers were French. However, other foreigners such as Belgians, Britons, Italians, Americans, and a few Australians joined the market, till the Riad market finally over-reached itself.
Demand is falling rapidly
This period of house price falls may continue in the medium term, because demand is falling sharply. Residential transactions fell by 10.5% y-o-y in Q4 2019, in sharp contrast to a 16% increase in the previous year, according to Bank Al-Maghrib. Quarter-on-quarter, residential sales transactions dropped 2.7% during the latest quarter.
By property type:
- Apartment sales fell by 10.2% y-o-y in Q4 2019. During the latest quarter, the number of apartments sold dropped 3.4%.
- House sales fell by 8.7% in Q4 2019 from a year ago. Though home sales increased 9.5% q-o-q during the latest quarter.
- Villa sales plunged by 31% in Q4 2019. Villa sales rose slightly by 0.3% q-o-q in Q4 2019.
Likewise, urban land transactions fell by 14.1% in Q4 2019 from a year earlier but were unchanged from the previous quarter.
RESIDENTIAL TRANSACTIONS, Q4 2019
|Property type||Annual change (%)||Quarterly change (%)|
|Source: Bank Al-Maghrib|
Attractive rental yields
Despite the housing market slowdown, gross rental yields in Morocco remain attractive based on Global Property Guide research.
In Marrakech, apartments have rental yields of between 6.5% and 7%.
In Casablanca, rental yields of apartments range from 5.5% to 6.5%. Houses in Casablanca (between 450 to 1,000 sq. m.) have lower gross rental yields, ranging from 3.7% to 4.1%.
However, round trip transaction costs - i.e., the total costs of buying and then re-selling a property - are significant in Morocco, at 12.50% - 17%, mainly due to registration fees and stamp duties.
Interest rates remain low
In the fourth quarter of 2019, the average interest rate for real estate loans in Morocco stood at 5.34%, almost unchanged from the same period last year, according to the Bank Al-Maghrib. The average interest rate has not shifted dramatically during the past decade, but has fallen by around 1%.
In March 2020, the Bank Al-Maghrib cut its key rate by 25 basis points to 2%, after it was left unchanged for four years. The move aims to shore up economic activity following drought and the COVID-19 outbreak.
Mortgage market shrinking gradually
Morocco has the most advanced and diverse mortgage market in the region, according to the Center for Affordable Housing Finance in Africa (CAHF). There are a wide range of sources for mortgage lending, including private commercial banks, public banks, consumer credit companies, and microfinance companies. The typical term period is 20 years, and the loan-to-value ratio can reach 100% of the property’s appraised value.
Morocco’s mortgage market expanded rapidly to 26% of GDP in 2012, from just 6.9% in 2001, due to the surge in Morocco’s GDP growth 2002-2008, causing housing demand to rise rapidly. Since then GDP growth has been somewhat slower, and in 2019 the mortgage market was 24% of GDP.
Partnerships between the government and banks make lending accessible to middle- and low-income families, through the establishment of mortgage guarantee funds such as FOGARIM and FOGALOGE (discussed below).
In February 2020:
- Housing loans outstanding rose 4.2% y-o-y to MAD 216.53 billion (US$21.43 billion)
- Property loans to developers fell slightly by 0.8% y-o-y to MAD 55.6 billion (US$5.5 billion)
Shortage of affordable housing
Despite a significant reduction in poverty in recent years, about 20% of the country’s population (or 6.4 million Moroccans) struggles to afford decent housing. In contrast, the high-end market is well-supplied. Morocco is a highly unequal country, and around 820,000 units are either vacant or used as vacation or secondary homes.
The government has implemented numerous housing projects over the past decade, mobilizing thousands of hectares of land, giving developers incentives to invest in social housing projects, and getting them to commit to build 900,ooo units by 2020. Social housing sales are VAT exempt (for areas between 50 sq. m. and 80 sq. m.), and prices are capped at MAD250,00 (US$24,739). Middle-income housing costs are capped at MAD6,000 (US$594) per square metre (sq. m.) for units ranging from 80 sq. m to 120 sq. m. Lending for middle- and low-income families is accessible through partnerships between the government and banks:
- The FOGARIM mortgage guarantee fund guarantees 70% of a mortgage loan made to a household with an informal income, to buy a housing unit worth less than MAD250,000 (US$24,739), helping about 1,200 new beneficiaries every month.
- Another guarantee program, FOGALOGE, guarantees loans to middle-class independent workers, moderate income civil servants, and non-resident Moroccans purchasing or building houses up to about MAD1 million (US$98,956) in value.
Morocco’s housing deficit has fallen from 1.2 million in 2002 to 400,000 units last year. To further improve the situation, the government plans to build 800,000 low-cost housing units by 2022.
Government: significant reforms, but significant corruption too.
Like other Middle Eastern countries, Morocco has experienced social and political unrest. But unlike other countries, Morocco’s political achievements, as well as the authorities´ responsiveness, have reduced the scale of the unrest.
It has certainly helped that Morocco has not experienced a single period of economic contraction during the entire period since 1997, causing unemployment to decline from 15.4% in 1997, to 9.5% in 2018.
The country’s relative stability can partly be attributed to King Mohammed VI’s economic and constitutional reforms:
- New civil rights including social equality for women, and constitutional guarantees of freedom of expression;
- Berber made an official language, alongside Arabic;
- The Arab-Hassani Language and Morocco’s other linguistic components are seen as part of the national heritage;
- Additional powers to the prime minister, who the King must appoint from the winning party in parliamentary elections;
- Parliament now has the power to grant amnesty;
- Independence of the judiciary;
- The King, however, remains commander-in-chief, holding complete control over the armed forces. He is also the chair of the Council of Ministers and the Supreme Security Council, and the highest religious authority in the country.
Yet despite positive achievements under King Mohammed VI, corruption remains very prevalent, reaching the palace itself. Royal involvement in business is a major topic in Morocco, unsurprisingly as the King is the Kingdom’s leading businessman and banker, and the royal family has one of the world’s largest fortunes. Decisions on big investments in the Kingdom are taken by only three people: the King, his secretary Mounir Majidi, and the monarch’s close friend, adviser and former classmate Fouad Ali Himma. Corruption originating in the royal palace especially affects the housing sector, as Wikileaks documents released in 2010 showed.
Budget deficit has been falling
To dampen popular protests at the time of the Arab spring, the King went on a spending spree in 2011, raising public sector wages and pensions, as well as subsidies. The budget deficit widened to 6.7% of GDP in 2011, up from 4.4% in 2010, according to the African Development Bank - a dramatic contrast to previous surpluses. The budget deficit rose further to 7.4% of GDP in 2012.
Morocco’s budget deficit has since been reduced to 3.6% of GDP in 2019.
Inflation slowed sharply to 0.3% in 2019, down from 2.4% in 2018 and from an average of 1.5% during 1999-2017. The central bank projects the inflation rate to stand at 0.6% this year.
Tourism has beenbooming, but severe downturn ahead
Tourism’s share of GDP is about 18% when indirect contributions are considered. In addition, the tourism sector employs more than 2.5 million people (both direct and indirect) – representing almost 25% of the total labor force.
In 2019, the total number of tourist arrivals rose by 5.2% to nearly 13 million from a year earlier, after growing by 8.2% in 2018, 9.8% in 2017 and 1.5% in 2016, according to the Moroccan Tourism Observatory.
France accounted for 15% of tourists to Morocco last year, followed by Spain, Arab countries, Germany, Italy, The Netherlands, Belgium, UK and the United States. In addition, Chinese tourists have been increasing rapidly in the past four years after visa requirements were relaxed, rising from just 10,000 in 2015 to around 350,000 in 2019.
Tourism revenues increased 7.6% to MAD 78.6 billion (US$ 7.7 billion) in 2019 from MAD 73 billion (US$ 7.2 billion) a year earlier.
Morocco’s major tourist destinations Marrakech and Agadir saw increases in visitor arrivals of 6% and 3% respectively last year.
However, the tourism sector is expected to experience a severe downturn this year, due to the coronavirus outbreak. The Ministry of Tourism predicts a loss of 100,000 tourists in March alone following a wave of flight and hotel cancellations after the country confirmed its first COVID-19 case in March 2. As of April 1, 2020, Morocco has already 638 confirmed cases, with 37 deaths and 26 recoveries.
Morocco’s tourism boom was mainly attributed to the government’s efforts to increase air flights into the country, build new airports in cities such as Fez and Agadir, and promote Morocco as a leading tourist destination online.
Morocco opened the US$2.4 billion Tangier – Casablanca high-speed rail line in November 2018, which lessens travel time between Tangier and Casablanca to two hours and 10 minutes instead of the previous five-hour train ride.
Plan Azur extended
Plan Azur, the much-delayed bundle of tourism expansion projects launched in 2001, continues under Vision 2020, focusing on 6 seaside resorts: Mazagan Beach Resort (in El Jadida province), Mediterrania Saidia (in Berkane province), Mogador (in Essaouira province), White Beach (in Guelmim province), Port Lixus (in Larache province), and Taghazout (in Agadir province).
The work on the Mediterrania Saidia resort and Mazagan Beach Resort was completed in 2009. Mogador Essaouira resort opened in late 2011, while Port Lixus opened in 2012. Plan Azur Extension adds three more resorts: Chbika, Ouarzazate Lake City, and Dakhla.
The attractions of Morocco centre on its traditional cities as Marrakech, Fes, Meknes, Casablanca, and its coastal resorts, Agadir and Essaouira.
Marrakech dates back at least to 1070 A.D. It is famous for its palaces, open markets, and gardens. It is an extraordinarily exotic city, with its drama heightened by a location at the foot of the Atlas Mountains.
Marrakech has a complete tourism zone, Aguedal. A public transport system carries tourists from the district into the city centre for its souks and traditional markets selling copperware, wool merchandise, and carpets and kaftans. There are no less than 27 5-star hotels in Marrakech.
Marrakech is also considered as the country’s best and largest golf destination, with more than 10 different golf courses designed by famous names like Robert Trent Jones, Kyle Philips, Jack Nicklaus and Colin Montgomerie, among others.
In 2019, Marrakech welcomed nearly 3 million tourists, up 8% from a year earlier, according to the Regional Council of Tourism.
TripAdvisor named Marrakech as the most popular tourist destination in Africa in 2020.
For over 400 years, Fes was the capital of Morocco. Founded in 789 A.D, it is the world’s oldest medieval city, and the largest. Considered Morocco’s intellectual and religious capital, it is a UNESCO world heritage site.
It was at its peak in the 14th century, and saw a fresh burst of glory in the 17th century. Narrow streets prevent the entry of cars into much of the city.
Here the French built a city in a French idiom, heavily influenced by the architecture of the Arab-Andalusian Empire. The city centre has a modernist grandeur, with plenty of space and light. Casablanca is large, modern, and agreeable, with at least ten golf courses less than an hour away.
Meknes was recognized as a World Heritage Site in 1996. Its physical location, on a plateau, made it Morocco’s trade crossroads. Its magnificent architecture was built by the 17th century Ruler, Sultan Moulay Ismail. Over 55 years he built palaces, mosques, gardens, and lakes. At his death the unfinished buildings including the royal palace - the Versailles of Morocco - which fills most of the old city.
Agadir is Morocco’s main seaside destination. Beautiful beaches, luxurious hotels, an ultra-modern airport are all combined with a moderate climate. Agadir’s beach is spectacular. 10 kilometres in length, it is clean and wide. Agadir enjoys a continuous breeze from the Atlantic, so that the temperature is pleasant all day.
A major earthquake completely destroyed the city in 1960. It was rebuilt from scratch. Agadir today is a modern city.
Tangier had a louche reputation from the 1920s onwards, when it was an outpost for British pederasts. Then in the 1950s, beats, dropouts and writers like Burroughs and Bowles, Ginsberg and Kerouac, Leary and Eldridge Cleaver came to Tangier. It is a messy, rather ugly city. Now its coastline is being covered with resorts and new developments.
Essaouira is popular with independent travelers. This is partly because of its long beach, and partly because of its laid-back atmosphere. The town has long been magnet for Moroccan poets and creative talent. In the Place de Lâ Indpendence, which is the main square in the centre of Essaouira, there are dozens of cafes and restaurants. It is a pleasant place to eat, drink, and watch the world go by.
- Real estate asset price index (Bank Al-Maghrib): http://www.bkam.ma/Publications-statistiques-et-recherche/Documents-d-information-et-de-statistiques/Indice-des-prix-des-actifs-immobiliers/Indice-des-prix-des-actifs-immobiliers-2019
- Morocco: rental yields range from around 3.7% to 7.0% (Global Property Guide): https://www.globalpropertyguide.com/Middle-East/Morocco/Rental-Yields
- World Economic Outlook Database, October 2019 (International Monetary Fund): https://www.imf.org/external/pubs/ft/weo/2019/02/weodata/index.aspx
- Monetary Statistical Series (Bank Al-Maghrib): http://www.bkam.ma/Publications-statistiques-et-recherche/Documents-d-information-et-de-statistiques/Series-statistiques-monetaires
- Morocco Tourist Arrivals (Trading Economics): https://tradingeconomics.com/morocco/tourist-arrivals
- Tourist arrivals in Morocco up 5.2 pct in 2019 (China.org.cn): http://www.china.org.cn/world/Off_the_Wire/2020-02/06/content_75676516.htm
- Debtor rates (Bank Al-Maghrib): http://www.bkam.ma/Marches/Taux-d-interet/Taux-debiteurs?relationWith=&startYear=2006&endYear=2019&block=3f927b0277dd9feff742550cbf315ebd
- 2019 Housing Finance Yearbook: Morocco profile (Centre for Affordable Housing Finance in Africa): http://housingfinanceafrica.org/documents/morocco/
- TripAdvisor Names Marrakech Most Popular Tourist Destination in Africa (Morocco World News): https://www.moroccoworldnews.com/2020/03/295828/tripadvisor-names-marrakech-most-popular-tourist-destination-in-africa/
- Almost 3 Million Tourists Visited Marrakech in 2019 (Morocco World News): https://www.moroccoworldnews.com/2020/01/291346/3-million-tourists-marrakech-2019/
- Morocco’s central bank cuts benchmark interest rate to 2% (Zawya): https://www.zawya.com/mena/en/markets/story/Moroccos_central_bank_cuts_benchmark_interest_rate_to_2-TR20200317nC6N2B101DX3/
- UPDATE 2-Morocco’s central bank cuts benchmark interest rate to 2% (Reuters): https://www.reuters.com/article/morocco-cenbank/update-2-moroccos-central-bank-cuts-benchmark-interest-rate-to-2-idUSL8N2BA5JD
- Azur Plan (Maroc.ma): http://www.maroc.ma/en/content/azur-plan