2023 looks set to be a difficult year for both property developers and households.
Amine Mernissi, real estate expert, believes that the real estate development activity is very land-intensive. Interview.
Interview by C. Jaidani
Finances News Hebdo: The figures for the real estate sector published recently are in decline. Is this cyclical or is it a new downward cycle?
Amine Mernissi: After an improvement in the second-hand real estate market, mainly, corroborated by the IPAI figures for the 3rd quarter of 2022 showing a jump of +45% in transactions, the 4th quarter of 2022 allows us to take stock of the year and highlights a drop in sales of real estate assets. Indeed, they have declined compared to 2021 by 15.4% over one year. A development that impacts all categories of real estate assets, i.e. -15.4% for residential, -18% for land and -9.8% for property for professional use. This situation is partly cyclical, since the negative impact of the Covid crisis and then the socio-economic consequences of the war in Ukraine are tangible and indisputable. But the fact remains that before 2020 (pre-Covid), the real estate market was already in a difficult situation. Consequently, the social and economic fragility induced by the sequence of two major and unexpected global events has seriously weakened a sector that was already structurally not doing very well... Today, the global economic situation being very troubled due to the uncertainty and the climate of risk linked to the war in Ukraine, has as consequences the difficulty in predicting and therefore controlling exogenous parameters. Which have a direct endogenous impact (galloping multi-sector inflation, among others, and household purchasing power in decline).
FNH: Are the measures taken by the government within the framework of the 2023 Finance Law sufficient to revive the sector?
AM: Correlated to various economic, political and social factors, the Moroccan real estate sector is experiencing a complex situation and is struggling to recover. The year 2023 also promises to be difficult for both real estate developers and households or future buyers who are facing both endogenous and exogenous factors. As for the 2023 Finance Law, for the time being, it leaves both developers and buyers hungry! The latter are simultaneously facing the delay by the public authorities in adopting the implementing decree for the new incentives dedicated to the sector provided for by the 2023 Finance Law. To date, no clarification has been made regarding the two "subsidized" products offered by the State, namely social housing expected to probably cost 300,000 DH and housing intended for the middle class at 600,000 DH. With for both, the granting of direct aid to households, which until now remains unknown, while the year 2023 is already well underway. Consequently, we are today still in the announcement stage. Only the operationality of this aid will make it possible to judge whether or not it will be a factor in the recovery of the sector. I say "one", because it cannot be the only one.
FNH: The scarcity of land is a major constraint in the sector. What levers can be invested in to remedy this problem?
AM: In Morocco, land is not scarce. It just needs to be freed up to make it available to operators. But the starting point is the will. This land issue has been recurring for decades. If it has not been resolved since then, we should then question the regulatory role of the State, or not... I would like to remind you that since 2022 and in a heavily inflationary context, the prices of land and construction materials have skyrocketed. Increasing, de facto, the cost price of real estate assets. Mobilizing public land and putting it on the market for operators is therefore a necessity. It also relates to urban planning and the cities that we want to build to accommodate our households over the next twenty years. There is therefore a forward-looking approach, combined with strategic public authorities who must set the tone.
FNH: Should we prioritize high-rise construction or increase taxation on undeveloped land?
AM: Yes, we must increase the construction height whenever possible. Today, we still have to fight to have more than R+5 in a hyper-centre! Why? It is abnormal that we have a real estate development activity that consumes so much land. With all the perverse effects that this induces, including a major (and useless) one: the all-out sprawl of cities. Also, I do not think that the taxation of undeveloped land should be increased. Because for a real estate developer, land is the sinews of war and its raw material. It is like stock for a company. It is not intended to remain static. On the contrary, it must be made to turn, reconstitute, to ultimately develop and enhance its value. Consequently, taxing it is unfair. But I would understand that it would be different for a speculator whose only vocation is to play for time to resell it one day with an incredible capital gain. There is a distinction to be made between one land holder and another in terms of taxation.
FNH: In the housing typology, we note an emergence of studio-type apartments. How do you explain this trend?
AM: This is not a new fact and has been the case for at least twenty years. The nuclearization of the family, like in Western countries, has led to a decrease in the need for large apartments. Single-parent families, couples without children or simply young professionals wishing to live alone, the studio is proving to be a highly sought-after product. Because it responds to a change in our society. Added to this is the prospect of rental investment. Indeed, the demand for a furnished studio is exponential in large cities. Even if the price per m2 is higher for a studio than for a large apartment, the trend is not weakening. It is clear that many studio owners choose to keep them and rent them out, even if they no longer correspond to their needs or to their marital or professional situation (marriage, transfer, etc.). The studio is a bit like the first foot that we put, or rather the first stone that we lay, in this dream that we could one day cherish, namely building up a real estate portfolio.
Source: www.fnh.ma
Article date: Sunday, March 12, 2023
