Morocco is now a buyers' market
Last Updated: February 20, 2015
“Morocco continues to be a buyers’ market, and, on that basis, buyers are beginning to materialize thick and fast, especially under the €1.5m mark.” says Alicia Pasley-Tyler of Aylesford International.
During the year to end-Q3 2014, the nationwide real estate price index (REPI) rose by 1%, according to Bank Al-Maghrib, Morocco’s central bank. On a quarterly basis, the REPI increased 1.4% in Q3 2014 (the REPI includes residential property, commercial property, and urban land).
- Residential property prices remained almost unchanged in Q3 2014 for the second consecutive quarter. Quarter-on-quarter, residential property prices dropped 0.2% in Q3 2014.
- Urban land prices increased 3.4% y-o-y in Q3 2014, after a drop of 8.4% in the previous period. Land prices rose by 4.3% q-o-q over the same period.
In Casablanca, Morocco’s economic capital, the average property price stood at US$1,873 per square metre (sq. m.) in 2014, with a large apartment in a high-end neighbourhood like Gauthier selling for around US$2,172 per sq. m..
The volume of real estate transactions increased 9.3% year-on-year to Q3 2014 from a year earlier, with residential property transactions increasing 11.8%, and land transactions 1.1%.
During the latest quarter (Q3 2014), the number of real estate transactions fell 15.1% q-o-q, after rising by 18.4% the previous quarter, according to Bank Al-Maghrib.
Of the total real estate transactions in the country, apartments represent about 59% of total sales, houses 4.9%, villas 1.2% and urban land 27.2%.
Construction activity remains depressed. Construction sector value added fell 0.3% y-o-y in Q3 2014, after a slight increase of 0.2% the previous quarter, according to Bank Al-Maghrib. Likewise, cement sales, an indicator of the current situation in the construction sector, also continued to drop by 8.7% in Q3 2014 from a year ago.
The Moroccan economy expanded by 3% in 2014, after real GDP growth rates of 4.4% in 2013, 2.7% in 2012, 5% in 2011 and 3.6% in 2010, according to the International Monetary Fund (IMF). In the fourth quarter of 2014, the economy grew by 2.7%, after growth of 1% the previous quarter, according to the Finance Ministry.
Morocco: reasonably good yields of around 5.5% to 7.2%.
Prices of Riads in Marrakesh have fallen significantly since the peak, and a price of US$2,400 per square metres (sq. m.) is now typical (in mid 2009 astronomical prices equivalent to US$3,000 were being asked, sometimes up to US$4,000). A 500 sq m. riad which might then have sold for the equivalent of US$1.5 million would now fetch US$1.2 million.
The riad market was foreign-oriented. It over-reached itself and suffered an overblown speculative frenzy. When the crisis hit and the ‘rich money’ left town. Since then, prices have recovered somewhat.
In contrast, prices of apartments in Marrakesh have stayed virtually unchanged, at around US$2,000 per sq. m. The same is true in Casablanca.
Gross rental yields in both Marrakesh and Casablanca are moderately attractive at between 5.5% to 7.2%.
Round trip transaction costs are high in Morocco. See our Residential property transaction costs analysis for Morocco and Residential property transaction costs in Morocco compared to the continent.
Moroccan income tax rates
rise progressively to 25.2%.
Rental Income: Net rental income is obtained by taking 40% off the gross rental income. The tax rate rapidly progresses from 0% to 38%, so that the top rate of tax is actually 24% of gross income.
Capital Gains: Profits on the sale of property are taxable at 20% of any profit, but with a minimum tax of 3% of the sale price.
Inheritance: There are no inheritance taxes in Morocco.
Residents: Residents are subject to progressive income tax rates on their worldwide income.
Total transaction costs are low in Morocco
Round trip transactions costs, i.e. the total cost of buying and selling a property, are around 12.50% to 17%. The buyer pays all the transaction costs. Additional expenses are involved in buying non-titled property.
Buyers need to be very careful when considering purchasing property in Morocco. In the main, it is not advisable to purchase any land that is not titled (as "Muhafida"). There are at least 3 types of land titles, and most of them are very doubtful. There are also in Morocco many nice-seeming but dishonest advisors. Clear titles can be very difficult to find, at least at a fair price.
The law in Morocco is pro-landlord
Rent: The rent can be freely agreed between the parties. The landlord can also ask for a guarantor to be named, who is legally obliged to pay the landlord for any debts owed by the tenant.
Modest economic growth; new constitutional reformsUnder King Mohamed VI, Morocco did not experience any economic contraction during the entire period since 1997, when GDP fell 2.2%. Morocco had notably strong growth in 2001 (7.6%), 2003 (6.3%), 2006 (7.8%), 2008 (5.6%) and 2011 (5%).
This can be attributed to the King’s series of social, democratic and economic reforms aimed at improving the lives of Moroccans and strengthen the Kingdom’s institutions. Some of his notable programs include poverty reduction, improvement of foreign relations and strengthening the parliament.
However, economic growth has slowed in recent years, mainly due to the debt crisis in the European Union, Morocco’s major tourism and trading partner. The Moroccan economy was estimated to have expanded by 3% in 2014, after real GDP growth rates of 4.4% in 2013 and 2.7% in 2012, according to the International Monetary Fund (IMF).
Better GDP growth of around 4.7% is forecast in 2015, as agricultural output picks up.
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 15.4% in 1997, to 9.2% in 2013. In Q3 2014, Morocco’s overall unemployment rate dropped to 9.6% from 10.2% in the previous period.
Inflation management has greatly improved, with inflation averaging 1.66% during 1999 – 2013, based on figures from the IMF. In December 2014, the annual inflation rate was 0.3%, according to the Finance Ministry.
Morocco’s budget deficit fell to about 5% of GDP in 2014, its lowest level since before the Arab uprisings that toppled other leaders in the region.
To dampen 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 6.7% of GDP in 2011, from 4.4% in 2010 – a dramatic contrast to the surpluses in 2007 (0.6% of GDP) and 2008 (0.4% of GDP). The budget deficit rose further to 7.4% of GDP in 2012 before falling to 5.5% of GDP 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.
Like other Middle Eastern countries, Morocco has experienced social and political unrest. But unlike other countries, Morocco’s political achievements, as well as the authorities’ responsiveness, have successfully reduced the scale of the unrest. 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 an official language in Morocco, alongside Arabic;
- The Arab-Hassani Language and Morocco’s other linguistic components are preserved as part of the national heritage.