Wednesday, June 15, 2011

On Morocco’s Housing Bubble

A google search of “Morocco’s Housing Bubble” reveals no hits. Which is surprising considering the reality on the ground. Houses pop up from the dusty land continuously never to be occupied. The windows are put in, the walls painted but no one ever moves in. The moonscape around Marrakech is patchwork of one housing development after another, all of them empty.
This does not necessarily mean that there is housing bubble. Many Moroccan nationals work abroad but own a home in their ancestral village. Remittances are a large part of the Moroccan economy. The exchange rate of euros to dhrm is very favorable, which means Moroccans can buy homes that they might only see once a year for a week during the big holiday. So while the developers may be selling them faster then they are built, the fact remains that a multitude of houses in Morocco are owned but empty.
The following article provides some insight: 

Morocco says housing market not stagnating
Thu Apr 29, 2010 12:51pm GMT

By Tom Pfeiffer
RABAT (Reuters) - Morocco's property market is likely to pick up in coming months, the central bank told Reuters, playing down fears of prolonged stagnation that could hold back economic growth in the north African country.
The price slowdown "has been quite brief and (the market) should very probably continue to resume its dynamism in the coming quarters," the central bank, known as Bank Al Maghrib, said in emailed replies, received on Wednesday, to questions from Reuters.
It said prices have begun rising again and the sector should "continue to present important investment opportunities given that most ... analyses suggest that demand significantly exceeds supply, especially in social and mid-income housing."
A Moroccan construction boom continued during the global economic downturn, helping prop up the economy even as local exporters faced slumping demand from recession-hit Europe.
Most of the building activity is in real estate after banking reforms gave middle-income families easier access to mortgages and thousands of apartment blocks sprang up to replace slums in the kingdom's teeming northern cities.
Housing growth has also underpinned the Casablanca stock market as local investors poured money into local real estate companies such as Addoha, which now accounts for over 10 percent of the bourse's capitalisation, according to traders.
Property prices have stagnated and sales have slowed since late 2008. Local analysts have voiced concern that prices were stagnating now because, prior to the end of 2008, Morocco had been experiencing a property bubble.
But the bank rejected that, saying that a 7 percent rise in property prices between the first quarter of 2006 and the third quarter of 2008 "is below that seen at the international level in the same period."
The rise over that period "in no way reflects an overheating of the property market," the bank said. "It is explained, in our view, by a catch-up effect."
Strong lending growth that has underpinned real estate projects in recent years continued in January, with mortgage lending still up 13 percent compared to a year earlier, according to central bank figures.
More Moroccans have been encouraged to open bank accounts and borrow as the banking network grew to reach more of the 34 million population.
Banks have been able to lend at lower rates and remain profitable because their bad debts have tumbled to around 5.5 percent, from a high of 19 percent in 2004 that was a hangover from risky lending in the 1990s.
Moroccan banks should continue to "further lower their levels of bad debts and reinforce their equity base," the central bank said.
Analysts have suggested that Moroccan banks are still too weak to finance some major projects in the local economy.
Asked if more mergers were needed among Moroccan lenders, the central bank said the sector was "characterised by a relatively high concentration of actors, the top three banks controlling 66 percent of the market".
"This concentration and consolidation of financial resources allowed the reinforcement of banks' capacity to finance the economy and the emergence of important financial groups that adopted strategies to deploy on the continent and in Europe."

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