Lower prices, improved mortgage terms and a series of government incentives for house buyers are leading to a rebound in sales and rentals in Jordan
Jordan’s real estate in numbers
JD6bn: Investments in Jordan real estate in 2008
JD15bn: Total investments in real estate in 2000-08
$3.6bn: Value of residential projects under way
Sources: MEED; MEED Projects
The Eid al-Fitr celebrations and the associated journey home to visit family are often marked with a house purchase in Jordan. The 600,000 Jordanians who work overseas have for decades opted to invest their earnings in property, in part contributing to an unsustainable real-estate bubble that burst in late 2008.
A number of flagship projects are now progressing, acting as a catalyst for the wider construction
The past two years have been tough for the country’s real-estate sector as remittances from expatriate Jordanians diminished and property plans were put on hold. But with the global economy reviving, Jordanians are poised to take advantage of lower property prices, improved mortgage terms and a series of government incentives for house buyers.
Real-estate boom in Jordan
While the rapid rise in the value of real estate across the Middle East was a defining feature of the region’s 2003-08 economic boom, Jordan’s own real-estate boom was not just part of the regional trend.
After the 2001 terrorist attacks in the US, many Arab families withdrew from their US and European real-estate investments, opting to hold their money in property closer to home. The low cost of living in Jordan meant that property prices in the kingdom were attractive. The 2002 invasion of Iraq and the consequent arrival of millions of refugees further strengthened demand for real estate as Jordan became a safe haven in the region. About two-thirds of all real-estate purchases made by foreign buyers in Jordan are by Iraqis.
|Jordan rental prices, 2010*|
|Apartment||First quarter||Second quarter|
|*=Rental rate, JD a year. Sources: Asteco; MEED|
The other contributing factor to Jordan’s property boom was the thousands of Jordanian expatriates working in the Gulf, who were reaping the benefits of the region’s economic success and buying property in their homeland.
In 2003-08, about JD15bn ($21bn) was invested in the country’s real-estate sector. In 2008 alone, an estimated JD6bn was invested in real estate, accounting for around a fifth of Jordan’s $31bn gross domestic product that year. Overall, the economy grew 7.8 per cent in 2008, with construction playing a large part in this rapid growth. The result was a real-estate bubble, in Amman in particular. In 2005-08, prices in the capital increased by more than 350 per cent. In Abdoun, Der Ghabar, Um-Othainah, Sweifieh and the Third to Fifth Circle areas of Amman, residential apartment prices averaged around JD 750-1,200 a square metre in 2008.
We have witnessed positive growth over the past three months in both sales and leasing rates
However, property prices dropped by an average 15 per cent in the 11 months to November 2009, as Jordan’s real-estate sector suffered in the wake of the global financial crisis. Estimates vary due to the lack of an official property price index, but Zuhair Omari, president of the Housing Investors Society, believes the 15 per cent figure is accurate.
Real-estate transactions dropped by a similar percentage over the same period, according to the Department of Land and Surveys, with the number of land transactions dropping 14 per cent from 79,488 to 68,078. The total value of property deals plummeted by more than a third during this period to $3.9bn.
Along with falling house prices, a further symptom of the downturn was the shelving of planned real-estate projects.
Many high-rise tower projects under design were either put on hold or cancelled as confidence drained from the market. For example, UAE-based Manazel Real Estate’s $500m Amman Gardens residential project was put on hold at the end of 2009, citing the global financial crisis as the reason for the delay. But a pick up in the global economy means a number of flagship projects are now progressing again, acting as a catalyst for the wider construction sector.
|Jordan apartment sales prices*|
|*=Second quarter 2010. Sources: Asteco, MEED|
In August, Arabian Construction Company was awarded a $92m contract to build the Rotana Hotel Tower in Amman. The tower will be the country’s largest at 188 metres and will house a five-star hotel with 425 rooms and have a total built-up area of 66,800 sq m. The tower will be located in Abdali, a district of the capital that is being transformed into a new central business district.
The $5bn Abdali Urban Regeneration Project is a major real-estate scheme to modernise downtown Amman through a mixed-use development combined with a network of new roads and supporting infrastructure. In phase one of the project about 28 per cent, or 287,000 sq m of the development will be residential, with the remainder comprising retail, hotels and office space.
Once the two-phase project is completed, residential real estate will account for 42 per cent or 744, 000 sq m of the total development. The project has already attracted some big-name tenants for its office space. The UK’s HSBC celebrating the opening of its Abdali office at the end of March. With multinational companies opting for an Abdali base, the development’s residential property is expected to be prime real estate. It is estimated the price of a square metre in the completed development will be between JD1,500-3,500.
Social housing in Jordan
This puts the flagship development well beyond the reach of the average Jordanian; a third of workers earn less than $500 a month, but there are several middle income and lower cost housing projects also planned. Amman has pledged, via its national housing programme, to provide a home for every citizen, with Minister of Public Works and Housing Mohammed Obeidat spearheading the policy.
In May 2009, the government introduced a string of tax cuts and exemptions – available only to Jordanian nationals – designed to stimulate the country’s housing market. For apartments that are 300 sq m or less, the first 150 sq m is exempt from registration fees; previously the first 120 sq m of an apartment of this size was exempted. Property tax has also been halved from 10 per cent to 5 per cent.
The measures appear to be having an impact; government figures show that house sales have risen in 2010. The number of residential apartments sold in the first eight months of 2010 was 14,109, up 13 per cent from the 12,435 apartments sold during the same period in 2009.
The value of real-estate transactions has also risen this year compared to last, with JD3.5bn of deals recorded, against JD2.7bn in 2009. The increased availability of finance for buyers is also helping the market.
UAE property firm Asteco reported in July that “improved and flexible mortgage facilities are gradually becoming available to individuals”. Crucially, the country’s developers are also securing loans for their projects. In June, a consortium of six local banks agreed a JD22.5m loan for the local developer Taameer Jordan Holdings to complete its Andalucia residential compound of 600 villas. The total project value is JD150m. Listed on the Amman Stock Exchange, Taameer was the fifth most traded company in August, with JD21m of trades made during the month.
According to regional projects tracker MEED Projects, some $3.6bn of residential real estate projects are planned or under way in Jordan. Taameer’s Ahl al-Azm Residential City is one such scheme that will help Amman progress towards its housing goal. The company has signed a memorandum of understanding with the Housing & Urban Development Corporation (HUDC) to develop the project south of Queen Alia International airport. Under the agreement, HUDC will give a 7.5-square-kilometre plot of land in two phases to Taameer.
The $1bn scheme includes more than 15,000 housing units between 80-180 sq m, and villas of 307-311 sq m. About 60 per cent of the development will be housing for middle-income families. The project is scheduled for completion in 2013.
Three of Jordan’s major residential projects are in the city of Zarqa, northeast of Amman. It is the focus of another major regeneration project.
Tameer is working with HUDC to build Madinat al-Majd City in New Zarqa, 15km from the centre of Amman. The 2-sq-km, two-phase project will house 50,000 people when complete,. The first phase of the project comprising 465 units is under way. Phase two of the project, which includes the construction of 18500 housing units, was put on hold in the third quarter of 2010. A new timeframe for re-starting the project has yet to eb announced.
Also in Zarqa, local Madaen al-Nour Real Estate Investment and Development Company has signed an agreement with HUDC to build another housing project that forms part of the kingdom’s national housing initiative. The $100m project will create 700 homes for private sector employees on limited and low incomes, with apartments varying in size from 80 to 140 sq m.
Lastly, Qatar’s Land International Investment & Real Estate Development Company is building $250m King Abdullah bin Abdulaziz al-Saud Residential City in Zarqa, which is due for completion in 2014.
The first phase will include100 semi-detached villas, 560 apartment buildings and 540 apartments complexes. Financing for the project is being provided through a joint venture of Austria’s Hoffman Company and local investors. Local banks will provide loans to citizens at subsidised interest rates.
With a string of housing projects moving forward, and rental and sales prices edging up in Amman, Jordan’s real-estate sector has turned a corner in recent months.
“For the first time since the downturn in the economy, we have witnessed positive growth over the last three months in both sales and leasing rates, although this has been limited to prime locations” says Asteco in its July report.
Remittances from Jordanians working overseas are also recovering. Representing 20 per cent of the country’s GDP, remittances are a crucial indicator for gauging the health of the real-estate sector and the wider economy. According to figures from the Central Bank of Jordan, expatriate transfers during the first four months of 2010 rose 26 per cent to JD979.7m from JD779m during the same period in 2009.
Forecasts for the kingdom’s economy as a whole reflect the positive trend in Jordan’s real-estate sector. Jordan’s economy is predicted to grow 3.5 per cent this year, with the recovery continuing in 2011.
A healthy pipeline of projects is evidence of the appetite for real estate – both for building and investing – in Jordan. Once the Eid al-Fitr celebrations have come to an end, Jordan’s real estate agents and developers may be celebrating a string of residential sales, after two very quiet years for the sector.
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