Market in Depth

Tunisia's housing market slowing sharply

Lalaine C. Delmendo | May 20, 2019

Tunisia's housing market is slowing sharply, despite booming tourism and improving economic conditions. This is largely due to rising mortgage interest rates.  Residential property prices are now falling, in real terms. Demand is down and construction activity is weak.

During 2018, the nationwide residential property price index rose by a miniscule 0.47%, a sharp slowdown from y-o-y rises of 10.23% in 2017, 14.8% in 2016, 5.99% in 2015, and 10.28% in 2014, according to the National Institute of Statistics. In fact, it was the slowest annual growth since the statistics agency started collecting data in 2000. When adjusted for inflation, prices actually dropped 6.5% in 2018 from a year earlier.

While apartment prices are now falling, house prices continue to strengthen. During 2018, apartment prices fell by 4.18% (-10.8% inflation-adjusted), in start contrast to a strong growth of 9.77% in 2017. On the other hand, house prices continue to rise strongly by 8.89% (1.32% inflation-adjusted), up from an increase of 6.18% in 2017.

There were also wide regional variations. The Southern region registered the biggest annual increase in residential property prices of 10.13% during 2018, followed by Midwest (9.02%), Northwest (5.58%) and Mid-eastern region. In contrast, Grand Tunis and Northeast saw house price declines of 0.47% and 3.44%, respectively.

Demand is falling rapidly. In the fourth quarter of 2018, the total volume of real estate transactions fell by 13.3% from a year earlier, according to the National Institute of Statistics. Sales for houses plunged 37.2% while apartment sales also dropped 6.4%.

While the housing market is projected to remain weak during the remainder of the year, property demand is expected to eventually increase in the coming years, driven by improving tourism and the government plans to provide affordable housing through its various programs, especially the newly launched “Programme Premier Logement”.

Tunisia house prices

Tunisia's economy grew by 2.5% in 2018, up from expansions of 2% in 2017, 1.1% in 2016 and 1.2% in 2015, according to the National Institute of Statistics. The economy is expected to improve further, with projected GDP growth of 2.7% this year and 3.2% in 2020, based on estimates from the International Monetary Fund (IMF).

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.


Analysis of Tunisia Residential Property Market »

Rental Yields

Yields are moderate in Tunisia

The rental market in Tunisia is very strong due to the high domestic demand for rental accommodation in addition to the demand from Europe and Tunisia’s neighbours Algeria and Libya.

According to UN-HABITAT, housing unit rents in Tunis range from TD 288 (USD 150.1) to TD 4,490 (USD 2,339.6) per month. The lowest rents are found in Ben Arous district, ranging from TD 190 (USD 99) to TD 1,250 (USD 651.3) per month. Presumably rents in other low-income areas outside the Tunis region are less, say in the TD 110 (USD 57.3) to 160 (USD 83.4) per month range.

Knight Frank estimates residential yields in Tunis to be around 9%.

Read Rental Yields »

Taxes and Costs

Income tax rates range from low to high in Tunisia

Rental Income: Rental income is taxed at progressive rates, from 26% to 35%. A standard deduction of 30% is given to cover income-generating expenses leading to effective tax rates ranging from 19.50% to 26.20%.

Capital Gains: Capital gains tax is levied at 15% if held for less than 5 years, and 10% if held for more than 5 years.

Inheritance: Inheritance tax is levied at varying rates, depending on the relationship between the deceased and the heir. Spouses and direct descendants are taxed at 2.5%.

Residents: Tunisian residents are taxed on worldwide income at progressive rates, from 15% to 35%.

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Buying Guide

Buying costs in Tunisia are low

Roundtrip transaction costs are around 9.10%. The transfer tax is 5% while real estate agent’s commission is typically 3%. Various registration fees add up to around 1.10%. The buyer pays for all the costs.

Read Buying Guide »

Landlord and Tenant

Tunisian law is pro-landlord in the free market segment

Rent: The rent can be freely negotiated. There is no legal maximum annual rent increase for free market tenancies, but any increase must be stipulated in the contract (typically, 5%).

Tenant Eviction: At term, the lease may be renewed by tacit agreement for the same period, or ended, if a notice is given by either of the parties in advance through a bailiff or by registered mail. Once the notice is given, eviction is swift. The court system is highly efficient.

Read Landlord and Tenant »

ECONOMIC GROWTH

Economy is improving; unemployment remains high

Tunisia’s economy grew by 2.5% in 2018, up from expansions of 2% in 2017, 1.1% in 2016 and 1.2% in 2015, according to the National Institute of Statistics.

The economy is expected to improve further, with projected GDP growth of 2.7% this year and 3.2% in 2020, based on estimates from the International Monetary Fund (IMF).

Tunisia gdp growth

Yet, jobless rate remains high. In Q4 2018, nationwide unemployment stood at 15.5%, unchanged from a year earlier. Female unemployment was 22.9% in Q4 2018, far higher as compared to the jobless rate among men of just 12.5%.

In 2018, Tunisia's trade deficit reached a record TND 19.04 billion (US$6.36 billion), up from TND 15.59 billion (US$5.21 billion) in 2017 and TND 12.6 billion (US$4.21 billion) in 2016, according to the National Institute of Statistics.

This led to currency weakness. The dinar, whose exchange rate is controlled by the Central Bank, has depreciated in relation to the dollar and the euro. In April 2019, the dinar lost almost 20% of its value against the US dollar from a year earlier, to reach an average exchange rate of TND 3.0291 = USD 1. Likewise, the dinar also depreciated against the euro by about 12.1%, at an average exchange rate of TND 3.4088 = EUR 1 in April 2019.

In April 2o19, nationwide inflation was 6.9%, down from 7.1% in the previous month and 7.5% a year earlier, according to INS. Inflation surged to 7.3% in 2018, the highest level since 1991.

Terrorism dampening political stability efforts


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, successful Parliamentary elections went smoothly, and Habib Essidof of the anti-Islamist Nidaa Tounes (Tunisia's Call) party, which won the most seats in October 2014's parliamentary election, was nominated 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 also 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.

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. Terrorist attacks have killed over 70 civilians including foreign tourists. Tourism, one of the biggest contributors to Tunisia's economy, took a major hit. It was only in 2018 that tourism showed a major comeback.
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