Lower Gulf demand hampers Jordan property rebound
Lower prices push up residential demand, oversupply eases.
December 9, 2010 12:01 by Reuters
Lower demand from Gulf Arabs and expatriates is hurting Jordan’s once booming housing market and jeopardising a recovery next year, industry executives said on Thursday.
They said although demand has picked up by an average 20 percent so far this year, the value of their purchases was still at least 50 percent below 2008 peaks.
Gulf Arab investors flush with oil revenue poured billions of dollars into real estate over the past decade, attracted by free market policies and lower prices compared with other regional markets.
The sector was also underpinned by strong demand from Iraqis, Palestinians, expatriate Jordanians and Lebanese seeking a safe haven in a country with a record of political stability.
But many large real estate development projects owned by Gulf Arab institutional investors such as Dubai-based Limitless, the real estate development unit of Dubai World, have either been delayed, cancelled or shelved.
Land Registry data showed the total value of property deals rose 20 percent to 4.9 billion dinars ($6.9 billion) in the first 11 months of the year compared with the same period last year.
Property consultants say the deals transacted mostly by Jordanians reflect how lower prices were pushing demand in the residential market at least 15 percent higher from 2009 lows.
In contrast, prices of desert property outside large cities, which saw speculation-driven buying during a 2005-2008 real estate bubble, were still at least 75 percent below their 2008 peaks, real estate agents say.
Increased lending by banks becoming less risk averse is expected to help recovery.
This would activate retail home buying and even benefit large property developers such as Taammeer which has finally received bank loans to ease a cash crunch that had delayed a $200 million luxury gated community south of Amman and other projects affected by the downturn.
“Financing by banks has improved and this is having an impact and should prop up the residential market further next year,” said Mohammed Afifi, managing partner of Century 21, a franchise of the U.S. based property consultant.
But property developers say there are scant signs of a turnaround in the commercial market, hit much more severely than the residential sector and not seen recovering before mid 2011 at the earlier. Vacancy rates are still at 25 percent.
“Commercial prices and demand are still suffering and we won’t see a pickup until mid-2011 when demand should start to reduce current oversupply,” Afifi said.
(Editing by David Cowell)