Morocco's real estate sector could escape global crisis

26/12/2008

Moroccan officials appear confident that the country's real estate sector is impervious to the global crisis, but would-be buyers think otherwise.

By Sarah Touahri for Magharebia in Rabat – 26/12/08

[Sarah Touahri] Moroccan officials have announced that their country has been spared the effects of the global real estate crisis.

Moroccan officials have announced that their country has been spared the effects of the global real estate crisis. Ahmed Taoufik Hjira, the minister of housing, urban planning and land management, asserted on Tuesday (December 23rd) that the Moroccan sector is not linked to the global sector, adding, "There is high demand here, unlike in Europe. The housing shortage is estimated at five million units. Each year 123,000 new families enter the market. We therefore need to meet current demand and reduce the shortage."

"The sector is in good health and is showing no signs of the effects of the crisis, unlike foreign real estate markets," agreed Anas Sefrioui, president of real estate group Addoha.

Sefrioui ruled out the risk that anything similar to the sub-prime phenomenon will be seen in Morocco, since bank loans are granted according to the capacity of borrowers to repay them and demand for property far exceeds supply.

The president of the National Property Developers’ Federation, Youssef Ibn Mansour, disagreed. "Although the real estate sector is growing rapidly, the government’s change of strategy has driven a wedge between public-private partnerships," he said.

"So far," he added, "no developer specialising in social housing has signed a contract with the government this year."

The president of the Council of Architects, Omar Farkhani, stated that building large numbers of new homes is not enough, and that standardisation is necessary to ensure that new homes are of high quality.

Realtors have expressed fears. Mohamed Maliki, a house agent based in Marrakech, said that business has slowed down over the past few months.

"Only property developers can cause downturns in their own business by keeping prices high and supply lower than demand," economics researcher Driss El Fina noted.

Professor Mehdi Bouchaib said, "Since statistics on property and inventories are not published in Morocco, or are at least unavailable to the general public, it is difficult to make an objective assessment of the real estate sector."

Meanwhile, citizens, who lack a clear picture of the sector, eagerly wait for prices to fall. Said Madichou, a civil servant, has been hoping to buy a reasonably-priced flat for three years.

"Over the last few years, prices have shot up to the point where they no longer reflect the true value of properties. Because of the global economic crisis, I’m hoping that prices will drop."

Although the Ministry of Housing has expressed optimism, it also said that steps must be taken to prevent problems. Hjira commented that reforms are needed in urban planning, local governance, and the number of market players. He acknowledged the existence of certain economic factors conducive to a downturn, such as rises in the prices of raw materials and business services, the gap between supply and demand, and a slowdown in purchases, especially in the luxury apartments sector. However, the banking sector offers numerous financing possibilities.

The head of the Moroccan Central Bank, Abdellatif Jouahri, said that the value of national property assets is equal to 14% of GDP, as compared with a figure of 70% in the United Kingdom and 100% in the United States.

"To avoid the creation of a property bubble," he added, "the Central Bank has ordered banks to draw up a code of good conduct outlawing the provision of financing to high-risk property development programmes. Banks send the Central Bank monthly reports on the activity of the largest groups in the sector." Jouahri noted that

"The bulk of the Moroccan real estate sector consists of social and high-quality housing, which is protected by state guarantee funds," he said.