The recovery of the sector remains dependent on several issues such as housing subsidies that are still awaited, or the indecision of households who are postponing their purchase decision. Demand, already drained, will suffer further due to the rise in real estate rates, and large listed real estate companies could experience a slight negative effect on their adjustable rate debts this year.
The real estate sector has experienced a highly disrupted 2022 on the stock market. While the latest figures at the end of September for the three listed real estate companies suggest an improvement in revenues, the latter have operated in a tense situation in 2022 and which will continue in 2023.
The real estate index on the stock market dropped 27.15% in 2022 in a strong inflationary context, where certain construction sites were brought to a standstill due to the surge in the cost of raw materials (cement, concrete reinforcing bars, fuel, glass, etc.).
However, Alliances was an exception in 2022 on the stock market with a strong increase of 40.6%. Good stock market performance driven by various factors, including the strong increase in net income at the end of June (+77%), the exit of shareholder SFI and the group's restructuring plan. An analyst confided about the value in 2022 that "this real estate company was able to reassure the market thanks in particular to its good achievements in 2021 and the first quarter of this year. Investors, particularly small shareholders, bet heavily on this value, especially during the optimistic phase that the market experienced in the first quarter of the year. The value had increased significantly during this period. Investors had cash and were looking for where to create the opportunity".
Since the beginning of 2023, the real estate index has dropped 6.72% at the opening of the session on January 16. All values have shown a decline since January 2. And for good reason, the context in which real estate is evolving is, to say the least, tense this year.
Rising rates will help demand to retreat
Inflation, which eroded household purchasing power in 2022, will continue its trend this year. Admittedly, less strongly, but the level of inflation will remain much higher than in 2021.
And this year, the increase in rates will further undermine households' purchasing power. When contacted, a local source explained to us that "the context is not favourable with this increase in rates. This will further reduce demand because the increase in the key rate will have repercussions on the levels of real estate rates".
Bachir Benslimane Bellemlih, CEO of Afdal.ma, an online mortgage loan comparator in Morocco, told us in a previous article that the increase was inevitable. “We are indeed forecasting credit rates around 4.3% on average in January 2023, and could go up to 4.4 % in certain banking establishments. This should continue to climb during the year 2023. We estimate that the 4.5 % mark should be quickly exceeded. And that of 4.7 % could be approached during the year.”
All this comes at a time when household confidence has reached a historic low in 2022, according to the latest figures from the High Commission for Planning (HCP). These figures show in particular that half of households expected their living conditions to deteriorate in the next twelve months.
In addition to the impact on households, our contact indicates that this rate increase will potentially play a role on the significant debts held at revisable rates by listed real estate companies. “This impact may not be significant in itself, but it will exist. We must observe for each listed real estate company the portion of their debt that is at revisable rates and, from there, the impact can be calculated. Because with a 100 bps increase in the key rate, it is clear that rates will climb, and therefore increase the interest on the debt,” explains the group.
Increased uncertainty around the issue of housing assistance
In addition to this, there is a slump, fuelled by the wait on both the seller and buyer sides, around direct public financial aid for first-time buyers. While some developers are delaying the launch of their construction sites, households are delaying their purchase decision while waiting to know the amount of this aid. In fine, little is happening on the market.
“Before, developers put tax-free social housing on the market and received, in return, VAT from the State. Now, the State announces that social housing is 300,000 dirhams and that it will be taxed. You must therefore pay both VAT and IS and, on the other hand, aid will be paid to households. But this brings in less than before when these properties were tax-free. However, inputs have increased, land has become more expensive… There is a problem with logic,” worries a real estate professional.
On the subject of rising costs, the vice-president of the FNPI, Anice Benjelloun, told LeBoursier at the end of November 2022 that “a home for sale at 300,000 dirhams including tax means 254,000 dirhams excluding tax. In addition, we will have to pay a range of taxes! Municipal taxes, management taxes, registration, land conservation, civil protection, IS… It would be around 45,000 dirhams. This means that we would have to sell for less than the current 250,000 dirhams. It is difficult to achieve”.
Asked about the subject shortly after mid-December, the Minister of Housing, Fatima-Zahra Mansouri, announced that the decree and the terms of this public financial aid for first-time buyers would be revealed in January.
Source: www.medias24.com, article from 01/16/2023.
