Tunisia property prices rising, but fears of terrorism have hit tourism
March 20, 2017
Known as home to the ancient city of Carthage, Tunisia continues to benefit from one of the strongest housing markets in North Africa. Tunisia's tourist-driven property market stands out in the region and has attracted a great number of foreign buyers looking for affordable properties in prime locations to spend their holidays. It is amazing to think that it was only in 2006 that the real estate market was opened to foreign ownership.
Tunisia hosts millions of tourists from Europe and the Middle East. The capital city, Tunis, is approximately 3 hours away from key European cities like London and Paris via airplane. The coast is just 50 miles away from Sicily.
Interest in Tunisian real estate remains high despite post-Arab Spring uncertainties. According to Centre for Affordable Housing Finance in Africa (CAHF), property prices have been increasing since 1990, and have continued to rise following the Arab Spring revolution, set off by the ouster of the country's president in January 2011.
Investors, in particular, remain optimistic. In 2015 (Tunisia's statistics are rather lagging) a total of €36.5 million ($48.6 million) was invested in Tunisia's real estate and tourism sectors - accounting for 4.5% of the total investment in the country, according to the Foreign Investments Promotion Agency in Tunisia (FIPA).
Interest is high among wealthy investors from the Gulf region:
- Qatar-based Qatari Diar is committed to invest about €34 million ($45.3 million) in a luxury hotel project in Tozeur
- The Emirates' Bukhatir Group's Tunis Sports City Complex is one of the largest real estate development projects in the pipeline. It was started in 2006 but was paused in 2012, with 15% of the construction almost complete. It will eventually house 30,000 people on the northern edge of the Lac de Tunis, with a number of sporting venues including a 10,000-seater outdoor stadium and a 5,000-seater indoor stadium.
Bassam Neifer, an analyst at the Tunisia-based equity market research firm AlphaMena is positive that the industry's fortunes will improve as it moves from its current construction-dominated phase into a sales-oriented phase. "The year 2015 was a difficult one for the sector; however, revenues could rise in 2017 as projects under construction begin to come on stream."
In the first quarter of 2016, jobs in the construction and settlements sector totalled around 459,800 - representing 13.5% of total employment. "More open legislation that allows property purchase by foreigners, and the removal of any need for purchase permission in tourist areas, is also likely to spur investment interest in the property market, particularly as confidence in the Tunisian economy returns," according to CAHF. 3% of state revenues come from taxes collected from rental and property management, VAT generated by construction, and local land taxes.
Land costs are pushing up house prices
Houses, apartments and villas in Tunisia are still much less expensive than in other places along the Mediterranean, such as Italy, Spain, Greece and even Morocco. CAHF put the unit price of the cheapest newly built houses (which are around 50 sq metres in size) at $25,500, which is affordable for over 70% of the population. This makes Tunisian housing amongst the most affordable, relative to the income of the local population, in North Africa and the continent as a whole.
However, prices are undoubtedly rising, with increases in the country averaging 8% per year according to CAHF, and even more in the Tunis region. This is largely due to the increased demand from foreign buyers and from the country's growing middle class - which, according to Brookings Institute, included more than 40% of the total population in 2010.
Nadhir Ben Ammar, CEO of local developer Edifia, also adds that scarcity of land, specifically in high-end areas in major towns such as Tunis, is also contributing to rising prices. "There used to be some supply around the Lac de Tunis but much of it was given over to the Tunis Sports City project," Ben Ammar told Oxford Business Group (OBG). The Tunis Sport City project was put on hold in 2012, but has since been restarted.
Data on housing prices is hard to get, however, and 'official' or semi-official statistics are rather old. According to the most recent account of the United Nations Human Settlements Programme (UN HABITAT), the average price of a single-family house increased from TD 23,845 ($12,425) in 2006 to TD 39,000 ($20,322) in 2010, with an increase of over 60% in four years or 13% per year. Average apartment unit prices have also risen, increasing from TD 32,710 ($17,044) in 2006 to TD 47,027 ($21,899) in 2010, i.e., an increase of 44% in four years.
|Type of Housing Unit||Average Price in TND (2006)||Average Price in TND (2010)||% Increase 4yrs in TD||% Increase per year|
According to local publication Tunisia Real Estate Guide (Guide de l'Immobilier en Tunisie), average real estate purchase prices in 2014 varied between TD1,200 (€550.32) and TD3,000 (€1375.80) per sq.m. in parts of the capital, Tunis.
Only 15% of housing units in Tunisia are rented, a percentage which has been decreasing over time, owing to government efforts to encourage home ownership.
Rental yields are low
Rental yields on long-term rentals in Tunisia are low, although it depends on the area. "Long-term rental returns are perhaps 3% to 4%," says Ouissem Hamila, owner of realtor and property managers Home in Tunisia. "But on student accommodation you can earn around 8% to 7%, and on social housing over 5%.
"The really high returns come from short-term rentals. Properties rented short-term to foreign tourists or to Tunisians from abroad earn median returns of from 8% to 12% over the whole period (i.e., taking account of vacancies). These properties tend to be occupied about 60% of the year."
Home in Tunisia provides a property management service for owners wishing to rent properties either long-term or short-term.
Taxes are much lower than in comparable developed countries. There's no taxation on unfurnished property rentals, and the taxes on furnished properties are low. Taxation on furnished properties in Tunisia is described here.
Property hotspots in Tunisia
Tunis, the capital, is a modern city. It is filled with historic sites including the 8th century Zitouna mosque. It is also the gateway to the ruins of the ancient city of Carthage.
The favourite residential areas for Tunis' political and business elite are the northern suburbs, the city centre and the business district of Tunis Berges du Lac. These have the most expensive houses, with prices ranging from TD 1,450 ($756) to TD 3,000 ($1,563) per sq.m. up 25% from 2000.
Well located and with good infrastructure, this affluent neighbourhood has been developed since the 1980s after building polders in Tunis Lake. It harbours many embassies, prestigious companies, and institutions. Residential apartments in Berges du Lac are typically 2 or 3 bedroom units of 110-150 sq m. According to Knight Frank, Berges du Lac I is now almost fully developed and therefore provides more services and facilities than Berges du Lac II, but as the buildings are somewhat older in Berges du Lac I, there is little difference between the rental levels achieved in the two areas.
"If it is difficult today to buy an apartment or a villa, it is because rents are interesting and rewarding, owners do not want to sell," said Ms. Salma Jedidi, manager of a real estate agency which a few years ago moved from the center of Tunis to Berges du Lac.
Other popular locations for expats are the northern suburbs of Greater Tunis such as Carthage and La Marsa. There is a relatively strong market for residential units to lease and for sale. Tunis Ennasr, a small posh neighborhood in the farthest northern corner of the urban sprawl of Tunis, is also a growing real estate hotspot.
Cheap districts are Tunis Ain Zaghouan, a historic site known for its 90-km aqueduct supplying Carthage with water, and the southern suburbs of Tunis, mostly hilltop villages, having the lowest house prices in the capital.
Other areas of interest to property buyers include:
Jardins de Carthage. South of the historic site of Carthage, this new neighborhood has become a hotspot for luxury real estate. With a popular tourist site in close proximity, Jardins de Carthage is an attractive option for luxury real estate developers, and house-hunters, looking to invest in upscale property. Prices in Carthage range between TD 2,500 ($1,303) to TD 3,000 ($1,563) per sq.m.
Coastal towns of Hammamet and Sousse. Hammamet, 65 km southeast of Tunis, is a popular destination for swimming and water sports due to its exceptional white beaches. It is among the tourists zones in Tunisia with the most expensive houses. Sousse, 140 km south of Tunis, has world-class resorts and sandy beaches, adjoining orchards and olive groves. The Medina (Old City) of Sousse is listed as an UNESCO Heritage Site. House prices range between TD 1,200 ($625) and 2,500 ($1,303) per sq.m.
Sfax, an industrial city located 270 km southeast of Tunis, is however very modern and pleasant. It is also one of the towns in Tunisia with the cheapest housing units. In Sfax, house prices are around TD 800 ($417) per sq.m.
Foreign ownership of Tunisian property
In 2005 the government passed a law permitting foreign ownership of properties for economic and tourism purposes. Since it became effective in 2006, the government has continuously encouraged foreign companies and tourists to invest in the country and buy properties in its prime cities. Official figures of the Foreign Investments Promotion Agency in Tunisia (FIPA) show that a total of €36.5 million ($48.6 million) were invested in Tunisia's real estate and tourism sectors.
A foreigner can buy a property in Tunisia, a villa or an apartment, but cannot own agricultural land. In fact, agricultural land cannot be sold to foreigners, whatever the reason of the purchase.
According to Giambrone Law, if the land is included in the national development plan, it must be considered as "residential"; but if not covered by the plan, it should be considered as agricultural and, therefore, not available for acquisition by a foreigner.
Purchase of property in Tunisia by a foreigner is subject to prior authorization, to be given by the governor of the region where the property is located. Despite this, in recent years more favourable legal provisions have been recognized as regards certain land and real estate operations carried out by foreigners. All purchases of real estate by non-resident foreigners are also necessarily subject to authorization by the Central Bank of Tunisia, according to the actual legislation of monetary exchange.
According to World Bank's Doing Business 2017 report, registering property there requires 4.0 procedures, takes 39.0 days and costs 6.1% of the property value. Globally, Tunisia stands at 92 in the ranking of 190 economies on the ease of registering property (with first place representing the greatest ease of doing business). Tunisia is 5 notches down Morocco (87) but higher than the Middle East and North Africa average.
|Summary of time, cost and procedures for registering property in Tunisia|
|No.||Procedure||Time to Complete||Cost to Complete|
|1||Consultation of pending encumbrances on the property at the Regional Land RegistryThe parties generally conduct a search for pending encumbrances of the property prior to the notarization of the contract. They can do this by going to the property registry and looking up the property on the computers there, where titles are kept electronically. The property registry delivers to the parties (requesting it) a certificate showing the legal situation of the land (or the building).Agency: Land Registry (Conservation de la Propriété Foncière)||1 day (for the consultation of the records at the land registry||TND 8 (nonencumbrance certificate)|
|2||Preparation and notarization of the contractThe contract agreement is prepared by a lawyer, notary public, or redacteur (CPF employee) at the Conservation de la Propriété Foncière after consultation with the property registry services. Both parties are summoned to sign it. Then the contract is notarized by a public notary or redacteur. Costs for this procedure vary according to who prepares the contract agreement. Businesses considered in the Doing Business case are likely to consult a lawyer even if fees are slightly higher. The lawyer fees are set freely between the parts while the notary fees vary from 1% to 5% of the property value. It is useful to note that redacteurs charge a minimum of TND 30 and a maximum of TND 300 for their service depending on the property and type of contract. The fees charged by the redacteurs are based on the decree N° 92-2114 of November 30, 1992.Agency: Lawyer, notary or redacteur of the Land Registry (CPF)||7 days||TND 30 - 300 (contract) + TND 0.5 per signature (notarization)|
|3||Pay the transfer tax and the registration fee at the Local Tax OfficeFees and taxes should be paid during the application for registration at the local tax office.Agency: Local Tax Office||1 day||5% of property value (transfer tax) + 1% of property value (registration fee)|
|4||The buyer files for a title deed at the Land Property AdministrationThe Land Registry studies the application. If accepted, the operation is
deposited and transcribed onto the Regional Land Registry.
The documentation shall include:
Agency: Land Registry (Conservation de la Propriété Foncière)
|30 days||TND 20 for deed and TND 8 for certificate|
|Source: World Bank Doing Business Report|
A buying guide is published by the Global Property Guide.
Terrorism damping political stability efforts but economy to recover in 2017 says IMF
The birthplace of the Arab Spring seems to be on track to be the first Arab Spring country to complete a transition to democracy.
Tunisia, the first Arab country to rebel against dictatorship, inspired similar revolts across other Arab countries - giving birth to what is now known as the Arab Spring Revolution.
The 2011 a revolution ousted President Zine al-Abidine Ben Ali; and a new legislative body, the National Constituent Assembly, was elected to navigate Tunisia's political transition. In October 2014, for the first time since independence from France, Tunisia successfully held competitive parliamentary elections. The elections went smoothly, and the outcome has increased the likelihood of a stable, coherent government. Habib Essidof of the anti-Islamist Nidaa Tounes (Tunisia's Call) party, which won the most seats in October's parliamentary election, has been nominated as Tunisia's new prime minister. This was followed by the victory of the 87-year old Beji Caid Essebsi, also of Nidaa Tounes, in the November and December 2014 presidential elections. Mr Essebsi alos served in the governments of post-independence leader Habib Bourguiba as well as Ben Ali.
The Islamist party Ennahda, which led Tunisia's last government but was beaten by Nidaa Tounes in October's parliamentary election, did not field a candidate. Essebsi's main opposition came from Moncef Marzouki, the interim president and a human rights campaigner who has cast himself as a guardian of the spirit of the revolution.
After the instability and associated slowing economic growth, the country rebounded, adopting a new constitution in 2014. However, security risks remain as terrorist operations have been staged by jihadi groups affiliated with al-Qaeda such as Uqba Bin Nafi Battalion and others by groups pledging allegiance to the Islamic State.
Since the terrorist attack of June 2015, there has been just one significant terror attack in Tunisia. But tourism, one of the biggest contributors to Tunisia's economy, is taking a hit. Terrorist attacks have killed over 70 civilians including foreign tourists.
Rating agency Fitch noted that "The collapse of tourism in the context of elevated security risks, slowdown in investment amid frequent government changes and episodes of strikes and social unrest have weakened economic growth performance and prospects." The country has exerted efforts to revive the tourism industry. In fact, in 2016, 5.7 million foreign tourists visited Tunisia compared to the 5.3 million that was recorded in 2015.
"We suffered last year from the terrorist attack," says Home in Tunisia's owner, Hamila. "But this year it is coming back, we had a lot of inquiries from Airbnb and the others. For the Easter holiday's we've had a lot of inquiries."
But there is much left to do in the economic reform front, according to Mohamed El Kettani, chairman of Moroccan bank Attijariwafa.
This is echoed by IMF mission chief to Tunisia Björn Rother, who states that "Tunisia's economy has shown resilience but continues to face important fiscal, external, structural, and social challenges." The public wage bill as a share of GDP is among the highest in the world, and the external current account deficit remains elevated, and public debt reached more than 60% of GDP in 2016.
The IMF chief, however, expects that growth should pick up to 2.5% in 2017 from 1.3% in 2016, following the successful "Tunisia 2020" conference in November 2016, which attracted more than $8.2bn in funding and $6.5bn in agreed investment. The former includes €2.6bn in loans from the European Investment Bank, €3bn in loans from the French government spread over four years, $1.5bn from the Arab Fund for Economic and Social development and $1.25bn from the Qatari government.
GDP grew by 0.8% in 2015 after rising 2.3% in 2014, the lowest since the 2011 economic slowdown.
Unemployment in the third quarter of 2016 was 15.5%. Women's unemployment is higher at 23.2%. According to Tunisia's National Institute of Statistics, 267,700 graduates were unemployed in Q3 2016, an increase on Q4 2015, when there were 241,400 unemployed graduates.
Tunisia has a history of effective inflation control and, despite some increases, the overall level of inflation has remained relatively stable. After peaking at 6.3% in February 2013, consumer price inflation fell to 5.5% in 2014, and to 4% in 2016, though it remains above levels seen before the revolution. The African Development Bank (AfDB) points to monetary factors and the Libyan crisis. The Libyan crisis has encouraged exports to Libya and contraband activities, causing basic food scarcities and pushing up prices in Tunisia.
The dinar, whose exchange rate is controlled by the Central Bank, has depreciated in relation to the dollar and the euro. The dinar traded at 2.43 against the euro and 2.29 against the dollar in February 2017, according to central bank figures. This depreciation has generated inflationary pressures that could accelerate if Tunisian foreign reserves continue to dwindle and the balance of trade worsens.
The current account deficit of 8.9% of GDP in 2016 was roughly unchanged from 2015 and reflected still low tourist inflows and declines in agriculture and energy exports, according to Fitch. The deficit is projected to widen to 9.3% of GDP by 2018, as a gradual recovery in tourism inflows will be offset by declining oil production and rising prices impacting imports.
Housing is a key national priority
Tunisia has successfully reduced its housing shortage and cut the number of substandard dwellings in recent decades. The ratio of statistically defined 'rudimentary dwellings' has declined from almost 24% in 1975, to 4.9% in 1989, and to 0.3% in the 2009 census.
Tunisia has also eliminated its 'housing deficit' (i.e. the number of un-housed households) and now has 580,000 more housing units than households, hence a 17.7% national vacancy rate. Total housing stock stood at 3,289,903 units, increasing by 789,103 units since the last census in 2004. The number is now well above the number of households (2,712,976), according to the 2014 census.
Of formal units, about 80% are built by individual households, 2% by public developers and 18% by registered developers, catering to middle to high income groups.
Acquiring permits to build houses is relatively easy and cheap by international standards. Tunisia ranked 59th out of 190 economies in the "dealing with construction permits" category - in the World Bank's 2017 Doing Business Report.
Though obtaining a building permit requires 17 separate administrative procedures, the process is quite fast, taking an average 93 days, compared to 139.7 across the region as a whole and 152.1 for wealthier OECD countries. The costs involved represent 2.5% of the value of a standard warehouse, compared to 3.1% and 1.7% for MENA and high-income OECD countries, respectively.
Are mortgages available?
Roughly 20 private commercial banks in Tunisia have housing loan programs for individuals, mainly targeting middle and upper income families. The average interest for mortgages from commercial banks is now 7.78%.
Banks are allowed to issue mortgages of up to 25 years in duration but are obliged to fix the rates for mortgages which last more than15 years, which makes financing them difficult. As a result most mortgages are for 15 years or less. Loans are capped at 80% of the value of the property (rising to 90% for subsidised loans for low income households). Monthly repayments are around one third of the typical borrower's salary.
The total value of long-term loans to home-buyers increased by 8.3% between 2014 and 2015, reaching US$3.71 billion. Mortgage lending is equivalent to 8.6% of GDP, according to the Central Bank's 2015 annual report. However, there's a high proportion of non-performing loans, which increased from 12% in 2010 (pre-revolution) to 15.7% in 2015.
The present competitive mortgage market is a great improvement from the situation up till 2001, when the Banque de l'Habitat (BH), in which the Tunisian state owns a 57% controlling stake, was the only mortgage lender, offering loans for house purchase, home improvement and residential land acquisition. It now only accounts for 23% of real estate lending according to figures cited in the local press.
Other institutions and funds helping the poor include:
- The Housing Promotion Fund for Salaried Persons (FOPROLOS, Fonds de Promotion des Logements pour les Salariés), managed by BH. Loan rates for mortgages range from 2.5% to 5.75% for three different income eligibility brackets, targeted at households earning a regular salary at between minimum wage and up to 4.5 times minimum wage (set at US$152 a month - from May 2015 onwards).
- The National Fund for House Improvement and Rehabilitation (FNAH, Fond National pour l'Amélioration de l'Habitat), which disburses loans for home improvement to those whose salaries are below a set minimum.
- The National Solidarity Fund 26-26 (Fonds de Solidarité Nationale 26-26) which supports the poorest of the poor, mainly through funding housing improvements of the very poor who live in upgrading and rehabilitation areas in Greater Tunis and other large towns.
Al Jadid Savings
The BH has recently added a range of three "supplemental" loan schemes, which are based on prior family savings, called Al Jadid 1 Al Jadid 2, and Al Jadid 3. These target families with incomes higher than those qualified for the FOPROLOS schemes. All interest rates are fixed at 7% per year for a maximum loan term of 15 years.
In essence, Al Jadid Savings schemes are at or near money market rates. Also, they do not have maximum income requirements to qualify, nor is the amount of the downpayment set (presumably to encourage larger equity contributions by beneficiaries). Thus Al Jadid Savings can be considered a "liberal" housing loan system, one much more in tune with market realities.
|MAIN INDIVIDUAL HOUSING LOAN SCHEME, MANAGED BY BH|
|Loan Scheme||FOPROLOS 1||FOPROLOS 2||FOPROLOS 3||Al Jadid (HP1)||Al Jadid (HP2)||Al Jadid (HP3)|
|Income||1 to 2 times SMIG||2 to 3 times SMIG||3 to 4.5 times SMIG||variable||variable||variable|
|Unit Area||Individual 50 sqm; Family 65 sqm||75 sqm||80-100 sqm||variable||variable||variable|
|Nominal Cost of Unit||TD 39,000||TD 50,000||TD54,00 to TD67,500||variable||variable||variable|
|Downpayment||10% of cost||10% of cost||15% of cost||4 years prior saving||5 years prior saving||6 years prior saving|
|Term||25 years plus 3 years grace||25 years plus 3 years grace||20 years plus 1 year grace||15 years||15 years||15 years|
|Maximum loan amount||90% of cost to maximum of 130 times SMIG||90% of cost to maximum of 170 times SMIG||90% of cost to maximum of 210 times SMIG||TD 53,000||TD 67,000||TD 83,000|
The microfinance sector has yet to grow substantially due to restrictive regulation and interest-rate caps set before the Revolution. Only one institution, Enda InterArabe, operates at any scale. At the end of 2013, Enda had 231,520 clients, and a gross loan portfolio of US$96 million, with a default rate of only 0.55%. In 2014, European Bank for Reconstruction and Development (EBRD) provided Enda with a loan for US$6.2 million to support them to scale their operations to micro and small and medium enterprises. Loan size and terms grew in 2014, ranging from US$567 to US$2,834, over a maximum period of 24 months.
- Tunisia's recent peaceful elections will reassure buyers - January 25, 2015
- Tunisia's emerging property boom - September 16, 2008