About Real Estate Market
Jordan is considered one of the most stable countries in the Middle East, attracting Gulf, Palestinian, Iraqi and Lebanese expatriates and investments. Contrary to neighboring GCC countries, Jordan’s core economic activities revolve around less energy intensive industries such as real estate and tourism, therefore, the Jordanian government has been expending numerous efforts in enhancing both sectors in recent years.The real estate and construction sector has been one of the most active sectors of the Jordanian economy lately. Construction sector accounted for 4.4 % of the Gross Domestic Product (GDP) on average over the period 2002-07. The sector has grown at a CAGR of 13.7 % during the same period. Credit to the construction sector has also expanded by a CAGR of 20.5 %, with the highest growth rates of 34.3 % and 24.4 % registered for 2006 and 2007 respectively. The construction sector has witnessed buoyant activity in recent years which has been unmatched in Jordan’s construction history. The construction sector was dubbed one of the most active sectors, growing at a CAGR of 13.7 % during the period 2002-2007. In effect, construction material costs are going through a period of price increases for almost all variety of construction materials. Building permits grew at a CAGR of 3.1 % over the period 2002-07. This came on the back of the huge increase in the number of permits issued during the year 2004, which reached a peak of 27.1 thousand permits. Moving forward, building permits declined during the years 2005 and 2006, slipping by 5.1% and 7.8 %, respectively, on the back of the boom in 2004, however, the year 2007 saw an improved performance, with building permits registering a rise of 5.2 % over 2006 figures. Residential permits continue to account for the bulk of building permits issued, accounting for approximately 88 % during the year 2006 and 2007, as compared to 90 % in 2005, while the share of permits issued for other purposes is slowly rising, contributing around 11 % in the years 2006 and 2007, as compared to 9.8 % in 2005. The majority of the permits issued in 2007 were in Amman, which accounted for 39.6 % of total permits issued in 2007, versus, 45.0 % in 2006, as building shifts onto other areas due to higher prices.Total value of real estate transactions stood at JD5.6bn at the end of 2007, growing at a CAGR of 36.1 % during the five year period 2002-07. In 2007, the value of real estate transactions grew by 7.7 %; this compares to steeper growth rates of 48.6 %, 75.0 % and 53.8 % recorded in the years 2006, 2005 and 2004, respectively. All in all, the value of investments in the real estate sector topped JD18.0bn over the course of the last five years. Moving forward, investments in Jordan’s real estate sector are expected to exceed JD50.0bn by the end of the year 2012. Total value of non-Jordanian investments in the real estate sector advanced at a CAGR of 22.6 % during the period 2004-07. In the years 2007 and 2006, value of non-Jordanian investment slipped by 7.3 % and 2.0 %, respectively, versus a steeper growth of 102.8 %, respectively. Moreover, non-Jordanian investments constituted around 2.4 % of total real estate investment at the end of 2007, compared to higher percentage contributions of 2.8 %, 4.2 % and 3.6 % in the years 2006, 2005 and 2004, respectively. Global Property Guide estimates that prices of Jordanian real estate have risen by approximately 20.0 % in 2007, after rising by around 10-30 % in the year 2006. Moreover, land prices are estimated to have risen by around 40.0 % in 2007 alone. The Landlord and Tenants Law No. 11 was amended in 2001, repealing an earlier provision that allowed a tenant to occupy a property indefinitely at the same rent even after the end of the lease term, consequently promoting investments in both the residential and office space segments. According to the amendments, all contracts that have technically terminated will end at the end of 2010, giving landlords the authority to ask for whatever rent they deem appropriate, which leads us up to the notion that there is a strong possibility of shortage in supply on various fronts of the real estate sector, as tenants vacate and start looking elsewhere for office and residential space. This point also highlights the kingdom’s growing need for low-middle income housing, as at present many tenants are paying outdated rents, while the amendment of the tenants’ law will inevitably raise the rent bills for many. The real estate boom in Jordan has inadvertently spilled over onto the tourism sector in Jordan. The kingdom has been receiving more tourists over the course of the last several years, where the number of arrivals in the kingdom increased at a CAGR of 6.9 % during the period 2002-2007, despite a slight slowdown in the number of arrivals during 2007, which fell by 2.74 %. Tourism income has been progressively increasing, moving up at a CAGR of 20.2 % during the period 2004-2007, while recording a 12.2 % rise in 2007 alone. Tourism/Government expenditure grew at a CAGR of 19.0 % during the period 2004-2007, while adding 5.2 % during 2007, further reflecting the government’s support for the sector. Preliminary figures released by Ministry of Tourism and Antiquities indicated that tourism income reached JD659mn by the end of the first five months of 2008, compared to JD629mn recorded at the end of the same period of 2007, an increase of 4.8 %. Furthermore, preliminary figures released by Ministry of Tourism and Antiquities (MoTA) indicated that total number of tourists visiting the kingdom as part of a tour package jumped by 49.5 % to 206.9 thousand visitors by the end of the first five months of 2008.