Better inflation management, a decline in unemployment and a boost is tourism is helping turn the Moroccan real estate market around, although experts say at this point it is more about maintaining marginal gains rather than claiming victory. The Arab Spring and the Eurozone crisis have both made for volatile times in the Middle Eastern country and more work must be done in terms of recovery.
Part of the tourism initiative includes opening resorts along the country’s coast as well as making it easier for tourists to travel in some of its most historic locations including Marrakech, Fes, Casablanca and Meknes, all of which boast 5-star hotels and other luxury amenities.
Morocco´s housing market is holding up well. Residential property prices rose by 1% during the year to Q2 2012, based on the real estate price indexes (REPI) constructed by Bank Al-Maghrib and the National Land Registry Office. Apartments had the highest annual price increase, rising 2.3% y-o-y to Q2 2012. During the same period, house and villa prices fell 1.8% and 2.6%, respectively.
The volume of apartment sales rose by 10% y-o-y to 17,454 units in Q2 2012, accounting for around 61% of transactions for the quarter. Villa transactions rose 40% y-o-y to 472 units, while transactions of houses fell by 6.1% y-o-y, to 1,318 units.
The housing market was weakened by local and global crises in 2007 and 2008. Based on CB Richard Ellis figures, sale prices dropped in Marrakech’s “High End” residential sector by up to 40% over the period 2008-2010.
“I’d say the glory days were between 2004 and 2007,” said Fes Properties partner Tim McTighe in a New York Times article. McTighe, along with other brokers, attributes the decline to the global recession. The political uncertainties brought by the Arab Spring in 2011 didn’t help either. Riad prices of around US$ 2,000 per square metre are now typical as compared to the prices in mid-2009 which reached US$ 3,000 per square metre, or sometimes even up to US$ 4,000, according to Global Property Guide figures.
The government’s ambitious program to develop Morocco’s tourism, Vision 2010, which was established by King Mohammed VI, was reintroduced in 2011 and is now called Vision 2020. It intends to double the previous plan’s tourist arrivals to 20 million and to place Morocco in the world’s top 20 tourism destinations.
The economy is expected to slow to 2% to 3% growth this year, as compared to 4.9% in 2011. However, 5% GDP growth is expected in 2013.
Constitutional reforms, a new government
Under King Mohamed VI, Morocco did not experience any economic contraction during the entire period since 1997, when growth plummeted by 2.2%. Morocco had decent growth in most years, and notably strong growth in 2001 (7.6%), 2003 (6.3%) and 2006 (7.8%).
But in Q2 2012 the economy expanded by only 2.3% y-o-y, half the 4.5% growth achieved in the year to Q2 2011, affected by the slump in the European Union, Morocco’s major tourism and trading partner. There was also a drop of 9.6% in the agriculture sector and 5.4% in the mining industry.
Better GDP growth of around 5% is forecast in 2013.
Unemployment remains high, causing complaints by Morocco’s Arab Spring protesters. However, Morocco’s sustained economic growth throughout the years has led to a substantial unemployment decline, from 11.4% in 2003, to 8.9% in 2011. The decline is most obvious in urban areas, with a drop in unemployment from 18.4% in 2004, to 13.7% in 2010.
Inflation management has greatly improved, with the inflation rate averaging 1.67% during 1999 – 2011. Inflation is expected to be around 2.2% in 2012.
Like other Middle Eastern countries, Morocco experienced social and political unrest in 2011. But unlike other countries, Morocco’s political achievements, as well as the authorities’ responsiveness, reduced the scale of the unrest. To address the situation, King Mohammed VI introduced a series of constitutional reforms aiming to improve democracy in the country:
- A number of new civil rights including social equality for women, and constitutional guarantees of freedom of expression, etc;
- Additional powers to the office of the prime minister, replacing the king as head of government and president of the council of government, as well as the authority to appoint government officials and to dissolve the parliament. The King is also obliged to appoint the prime minister from the winning party in the parliamentary elections;
- The parliament now has the power to grant amnesty;
- Independence of the judiciary system from executive and legislative branches;
- The King, however, remains commander-in-chief, holding complete control over the armed forces. He is also the chair of the Council of Ministers and the Supreme Security Council, and the highest religious authority in the country;
- Berber was made as an official language in Morocco, along with Arabic;
- The Arab-Hassani Language and Morocco’s other linguistic components are to be preserved as part of the national heritage;
An early parliamentary election was held on November 25, 2011, due to the public protests. Abdelilah Benkirane, the leader of the moderate Islamist-oriented Justice and Development Party, which won a plurality of seats, assumed office in November 29, 2011 as new Prime Minister.
High budget deficit
To dampen the popular protests, the King went on a spending spree in 2011, raising public sector wages and pensions, as well as subsidies. Expenditures increased to 29.9% of GDP, from 27.4% in 2010, according to the African Development Bank. The budget deficit widened to 6.1% of GDP in 2011, from 4.7% in 2010 – a dramatic contrast to the surpluses in 2007 (0.6% of GDP) and 2008 (0.4% of GDP).
This year Morocco’s budget deficit forecast remains at around 5%. The Moroccan government intends to cut the deficit to around 4.8% in 2013.
To counter the effects of EU’s slowdown and oil price swings to their economy, the Moroccan government sought help from the IMF, and was granted a loan worth US$6.2 billion. In exchange, the government will reform the pension system, as well as directing the costly universal subsidies to those most in need.
Huge tourism expansion is on track
The government’s tourist development plan, Vision 2010, achieved 9.3 million visitors in 2010, just below its target of 10 million tourists. Vision 2020 aims to double tourist arrivals to 20 million by 2020.
Tourism in Morocco this year is expected to at least match 2011’s receipts, as the country shifts focus to Eastern European and Middle Eastern markets, to compensate from the declining tourist arrivals from the Euro zone. The numbers of tourism arrivals in August 2012 rose by 42% as compared to August 2011, according to the Moroccan Ministry of Tourism.
Morocco’s “open skies” agreement with the European Union in 2006 has boosted air travel growth, with passenger numbers doubling in six years to 15.5 million in 2010, from 7.7 million in 2004. Lower ticket prices and more domestic routes are being introduced by Royal Air Maroc. Meanwhile, a Casablanca – Tangier high speed rail project started in 2011 is expected to be operational by 2015.
Plan Azur continues
Under the Vision 2020, Plan Azur will continue, focusing on 6 new seaside resorts, namely: Mazagan Beach Resort, Mediterrania Saidia, Mogador Essaouira, Plage Blanche, Port Lixus, and Taghazout-Argana.
The work on the Mediterrania Saidia resort and Mazagan Beach Resort was completed in 2009, according to a Vision 2010 review from the Ministry of Economy and Finance’s Financial Forecasts and Studies division (Division des Etudes et des Prévisions Financières, DEPF). Mogador Essaouira resort opened in late 2011, while Port Lizus is expected to open this year.
Aside from re-launching Plan Azur, other programs will be launched under the Vision 2020. This includes: a sustainable development plan (ecotourism), a cultural heritage programme, more developed leisure and health activities, and business tourism.
The long Moroccan real estate boom of course predates the mass market, and concentrates on the ‘authentic’ Morocco – and above all on giving Westerners a stylish life in exotic, traditional surroundings.
At its core has been the craze for buying riads. Riads are traditionally-shaped Moroccan houses, with grand salons giving onto a central tiled courtyard, often with a garden at the center.
However, the housing market slowdown was also reflected in riad prices. Based on the Global Property Guide research, riad prices in Marrakech have fallen to around US$ 2,000 per sq. m., as compared to the US$3,000 or sometimes up to US$ 4,000 per sq. m. in mid 2009. Riads now cost between US$ 200,000 to US$ 1,000,000, depending on the size. “There have been some good bargains from foreigners who had to resell riads quickly,” says Fez Real Estate’s owner Frédéric Sola.
Previously, the majority of riad buyers were French. However, other foreigners such as Belgians, Britons, Italians, Americans, and a few Australians have joined the market.
Attractive rental yields
Gross rental yields in Morocco remain attractive based on Global Property Guide’s report dated September 2011. In Casablanca, apartments had an average yield of 7.7%, higher from the previous year’s 7.3%. Apartments’ gross rental yields ranges from 6.8% to 8.6%. Yields for houses are much lower, at 5.4%.
Numbers for yields on Marrakech’s riads are still unavailable. Meanwhile, apartments in Marrakech offer higher yields than the previous year, ranging from 5.9% to 8%.
The attraction centres of Morocco
The cultural and physical attractions of Morocco centre on its traditional cities as Marrakech, Fes, Meknes, Casablanca, and Essaouira and on its one coastal resort, Agadir.
Marrakech was built in 1070 A.D.. It is famous for its palaces, open markets, and gardens. It is an extraordinarily exotic city, with its drama heightened by a location at the foot of the Atlas Mountains.
Marrakech is expecting three and half million tourists by 2010. Marrakech has a complete tourism zone, Aguedal. A public transport system carries tourists from the district into the city centre for its souks and traditional markets selling copperware, wool merchandise, and carpets and kaftans. There are no less than 27 5-star hotels in Marrakech.
For over 400 years, Fes was the capital of Morocco. Founded in 789 A.D, it is the world´s oldest medieval city, and the largest. Considered Morocco´s intellectual and religious capital, it is a UNESCO world heritage site.
It was at the peak in the 14th century, and saw a fresh burst of glory in the 17th century. Narrow streets prevent the entry of cars into much of the city.
Here the French built a city in a French idiom, heavily influenced by the architecture of the Arab-Andalusian Empire. The city centre has a modernist grandeur, with plenty of space and light. Casabablanca is large, modern, and agreeable, with five golf courses less that an hour away.
Meknes was recognized as a World Heritage Site in 1996. Its physical location, on a plateau, made it Morocco´s trade crossroads. Its magnificent architecture was built by the 17th century Ruler, Sultan Moulay Ismail. Over 55 years he built palaces, mosques, gardens, and lakes. At his death the unfinished buildings including the royal palace - the Versailles of Morocco - which fills most of the old city.
Agadir is Morocco´s main seaside destination. Beautiful beaches, luxurious hotels, an ultra-modern airport are all combined with a moderate climate. Agadirâ´s beach is spectacular. 10 kilometres in length, it is clean and wide. Agadir enjoys a continuous breeze from the Atlantic, so that the temperature is pleasant all day.
A major earthquake completely destroyed the city in 1960. It was rebuilt from scratch. Agadir today is a modern city.
Tangier has a louche reputation dating from the 1920s, when it was an outpost for British paederasts. Then in the 1950s, beats, dropouts and writers like Burroughs and Bowles, Ginsberg and Kerouac, Leary and Eldridge Cleaver came to Tangier. It is a messy, rather ugly city. Now its coastline is being covered with resorts and new developments.
Essaouira is popular with independent travelers. This is partly because of its long beach, and partly because of its laid-back atmosphere. The town has long been magnet for Moroccan poets and creative talent. In the Place de Lâ Indpendence, which is the main square in the centre of Essaouira, there are dozens of caf s and restaurants. It is a pleasant place to eat, drink, and watch the world go by.
This article was first published by Global Property Guide.
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