Jordan's property prices continue to rise, amidst slowing demand
Last Updated: October 20, 2013
"Apartment sales prices across Amman also experienced an average 2% quarter-on-quarter increase (in Q2 2013) due to rising land prices, which has prompted developers to pass on the higher costs directly to buyers," said Hussein Safadi, General Manager of Asteco Jordan.
Al-Rabiah saw the biggest house price increase of 15% during the year to end-Q2 2013. It was followed by the 4th Circle (10%), Abdoun (9%), Sweifieh (8%) and Um-Othainah (8%).
Abdoun has the country's most expensive housing, with an average price of JOD1,175 (US$1,654) per square meter (sq. m.) in Q2 2013, followed by 4th Circle with an average price of JOD1,150 (US$1,619) per sq. m. over the same period.
Jordan’s property market slowed sharply in 2008 due to the global crisis, with house prices falls estimated at about 10% to 15%, according to local real estate analysts. However in 2011, the housing market almost returned to the peak levels of 2006 and 2007, thanks to the property tax cuts and registration fee exemptions implemented by the government since May 2009.
Apartment sales increased by about 2% in the second quarter of 2013 from the previous quarter, a slowdown from a 6% quarterly increase during Q1 2013, mainly due to the ongoing regional socio-political unrest.
The country’s rental market remains stable. In Amman, the capital, the average rent for one to three-bedroom apartments was flat in Q2 2013. However, in Sweifieh, apartment rents rose by 2% q-o-q and 4% y-o-y in Q2 2013. Likewise, in Abdoun, apartment rents also increased by 1% q-o-q and 3% y-o-y over the same period. The slight increase in demand in the two areas is mainly attributed to their close proximity to retail and entertainment establishments.
Jordan’s property market is expected to remain stable for the rest of 2013, amidst modest economic growth, according to local property experts.
The economy is projected to grow by 3.3% in 2013, after real GDP growth rates of 2.8% in 2012, 2.6% in 2011 and 2.3% in 2010, amidst rising government spending, higher domestic consumption and a recovery in exports, according to the IMF.
Foreigners can buy housing and land in Jordan, but must not sell within five years. In the past, permission procedures were lengthy, but now approval can be obtained in just 10 days.
Jordan: gross rental yields are good
Typically, it costs around US$1,300 per square metre to buy an apartment in Jordan’s capital Amman – less at the lower end, more for larger apartments. Prices have been falling over the last couple of years.
Gross rental yields on apartments in Amman are good, at between 7.0% to 10.65%.
Yields on villas are somewhat lower, at around 5.0% to 7.5%. This is because villas tend to cost substantially more on a per square metre basis, because of the land value.
Moderate to high taxes in Jordan
Rental Income: Rental income is considered business income and is subject to corporate income tax.
Capital Gains: Capital gains are generally not taxed in the country.
Inheritance: There are no inheritance taxes in Jordan.
Residents: Residents are taxed at progressive rates.
Total transaction costs are moderate in Jordan
Roundtrip transaction costs are around 7.94% to 12.94%. Registration fee is levied at 3% to 8%, the applicable rate varies depending on the status of the buyer and property size. Both parties equally share the real estate agent’s fee of 4%, which is subject to a 16% Goods and Services Tax (GST).
Rents are paid a year in advance in Jordan
Rent: Since most rents are paid a year in advance, deposits are not required.
Tenant Security: The typical lease contract lasts a year, with an option to renew. Although leases with shorter terms are also allowed in Jordan, such contracts have higher rents (the one-year contract of lease, under Jordanian law, cannot be broken).
Modest economic growth in 2013The Hashemite Kingdom of Jordan is a small constitutional monarchy (pop 6.4 million) situated across from West Bank. Jordan is not an oil rich country (GDP per capita is only US$4,879 in 2012), and has few natural resources. The country is supported by foreign loans, aid and remittances from abroad. Jordan is relatively peaceful compared to other oil-rich neighbors.
Jordan’s economy has been transformed in the last fifteen years. After a devastating banking and exchange rate crisis in 1993 which halved the standard of living of the average Jordanian, the economy has been turned from a state-controlled economy, with highly regulated trade, to a liberal economy with a fast growing export sector, and with a reputation as a place where business can be done (though the state still weighs heavily on the economy). The present King Abdullah, who ascended to the throne in 1999, is said to be a key proponent of these changes.
The Jordanian economy was seriously affected by the global financial crisis and regional socio-political unrest. Investment from oil-rich Gulf countries dropped. Remittances from expatriate Jordanians also dropped. After growing by an average of 8.3% from 2004 to 2008, real GDP growth slowed to 5.5% in 2009. Economic growth slowed to an average of 2.6% from 2010 to 2012, according to the International Monetary Fund (IMF).
In the second quarter of 2013, Jordan’s economy expanded by 3.06% from the same period last year, up from an annual growth rates of 2.6% in Q1 2013, and 2.2% in Q4 2012.
The economy is projected to grow by 3.3% in 2013, after a real GDP growth rate of 2.8% in 2012, amidst rising government spending, higher domestic consumption and a recovery in exports, according to the IMF.
The country’s construction sector grew by 9.5% y-o-y in Q2 2013, fuelled by strong local, expat and Arab demand for housing.
By end-July 2013, bank lending rose by 7.7% y-o-y to JOD18.56 billion (US$26.2 billion), due to higher private sector borrowing.
The kingdom's budget deficit is expected to shrink to 4.8% of GDP in 2013 from 8.2% of GDP the previous year, according to the IMF. During the first half of 2013, the budget deficit fell by about 26% to JOD309.2 million (US$435.2 million) from JOD416.7 million (US$586.5 million) during the same period last year, according to the Ministry of Finance. The country expects to receive about JOD850 million (US$1.2 billion) worth of foreign grants in 2013.
The country’s public debt is expected to be about 72.2% of GDP in 2013, down from 75.5% of GDP in 2012.
The Central Bank of Jordan (CBJ) cut its benchmark re-discount rate by 25 basis points to 4.75%, amidst improving economic fundamentals and an increase in the demand for the Jordanian dinar (JOD) denominated assets. The CBJ last changed the benchmark rate in February 2012 when it raised the rate by 50 basis points to curb inflationary pressures.
In September 2013, the overall inflation rate stood at 6.1% y-o-y, according to the Department of Statistics.
The country’s unemployment rate rose to 14% in Q3 2013, up from 12.6% in Q2 2013 - a male unemployment rate of 11.3%, and a female rate of 26.8%.
Jordan’s membership in the Gulf Cooperation Council (GCC) is expected to generate additional investments. In addition, the five-year development plan initiated by the GCC for Morocco and Jordan will likely improve its job market.