16 May 2012
| On Shaky Ground |
| February 2012 | |
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Amid crisis, Syria's real estate sector struggles to go on. By Rasha Faek
Owning a house continues to be an elusive dream for many Syrians, especially for the young and those with limited incomes. The current crisis has only made this situation worse. Before the unrest began, Basel, a 33-year-old web programmer in the Damascus suburbs, had hopes of buying an apartment for his wife and himself. After three years of work, he was close to completing all the required paperwork to get a home loan. But then the protests began and the bank cancelled all lending operations. “It was a dream...however, it’s a nightmare now,” Basel told Syria Today. “We could not buy a flat before the crisis, and we certainly would not be able to do so today.” Like many others, Basel has now put off his plans of finding a house, preferring instead to search for a job opportunity abroad. In 2010, Damascus was the eighth most expensive city in the world in terms of real estate prices, according to a report from Cushman and Wakefield, a global property consultancy based in London, with apartments in the city centre selling for as much as SYP 50m (USD 0.9m). Since the unrest started in 2011, Syria’s economy has been battered, but that has not stopped real estate prices from continuing to rise, while investment in the real estate construction sector dries up and banks become ever more reluctant to give out home loans. The price of apartments per square metre in Damascus still ranges from SYP 75,000 (USD 1,103) to SYP 500, 000 (USD 7,353). While the average monthly wage is SYP 10,000 (USD 172) and an average family shares a monthly income of SYP 25,000 (USD 378), Syrian families who spend more than SYP 7,500 (USD 110) each month on housing can be considered cost-burdened. This is especially true when considering the high level of economic dependency, as an average Syrian employee supports four people.
Investment drought Syria aimed to attract as much as USD 55bn in foreign currency through direct investment over the next five years, with about USD 25bn of it supposed to go into infrastructure projects. However, in October 2011, Minister of Economy and Trade Mohammad Nidal al-Cha’ar described the country’s economy as being in a “state of emergency”. Syria’s 2012 budget stands at SYP 1,326bn (USD 22bn), up from SYP 835bn (USD 14bn) in 2011. However, public investment expenditures stand at SYP 375bn (USD 6.5bn), down slightly from SYP 380 (USD 6.6bn) last year. Qatar has been one of the few large investors in Syria in sectors other than oil, along with the United Arab Emirates. However, in May, the Qatari state-owned Diar Al-Qatari real estate company halted a central Damascus project with a planned built-up area of 2.5m square meters. Another smaller project on the Mediterranean seafront near the city of Latakia, one of the protest hotspots, is now also at a standstill. Drake and Scull, an international engineering firm based in the United Arab Emirates, recently halted work on a SYP 1.9 (USD 28m) subcontract in Homs. “Most of the projects that have broken ground are continuing, but the ones that were only planned for have been effectively scrapped,” said Associate Director of the General Commission for Real Estate Development and Investment (GCREDI) Ghiath Catini. The mandate of this governmental commission is to organise and encourage investments in this sector. During 2011, GCREDI granted licenses to 36 Syrian real estate developers to set up housing projects in various Syrian cities that would provide more than 126,000 houses to serve about 627,000 people, Catini said, but none of these have yet started building work. “The cost of [another newly approved] smaller project is estimated at about SYP 3bn (USD 44m),” he said. “In the current economic and security crisis, developers feel they need to be patient.” Bena Properties, the real estate and investment arm of Cham Holdings, Syria’s biggest private company, says its planned development projects are all being implemented as scheduled, despite EU and US sanctions directly targeting the company for its links to the Syrian regime.
Priced too high A “Youth Housing Project” launched by the government in 2002 and implemented by the General Housing Establishment, a governmental company, has gathered more than 61,000 subscribers, but less than 11,000 homes have been delivered since then. “There were a range of administrative difficulties, most notably a delay in finding suitable land to start implementing the project,” explained Maoi Rnjus, social housing manager at the General Housing Establishment. On January 16, the government agreed to start a programme to build 50,000 housing units in cooperation with the Iranian government, but it is unclear how long these will take to build. However, according to the Oxford Business Group, a UK-based research company, the problem is not a lack of available housing, but rather its affordability. According to its 2011 Syria Report, there are more than 500,000 empty apartments in the country. According to one local real estate agent, who asked not to be named, the problem is the plummeting value of the Syrian Pound, which has dropped around 30 percent against the dollar since March last year, discouraging existing homeowners from selling their properties. This is helping to keep prices high. “People fear the potential loss of value of the national currency,” he told Syria Today. “Those who bought at a high price will not sell now at a cheap one,” he said. Rental fees have also increased in Damascus and Aleppo, the real estate agent said, as many families are keen to move to these cities from less stable parts of the country. Before the crisis, most Syrians used to buy or even rent houses in the suburbs, which is seen as impossible now since many of them are considered protest hotspots. Also, banks have few lending options, and even the retail market looks too risky in such times. A quick glance shows smaller balance sheets, weaker lending growth, lower cost efficiency, and deteriorating asset quality across the Syrian banking community. Total loans, which grew over 56 percent in 2010, decreased 4.1 percent in the first half of 2011 to reach SYP 252bn (USD 4bn), Bemo Saudi Fransi Finance (BSFF) banking sector research reported. Meanwhile, public banks have completely stopped all loans in problem areas during the crisis.
Looking ahead Alaa Hilal, chief executive of the Syrian firm Arabian Group and organiser of the BUILDEX international construction exhibition in Damascus, says the industry will recover as the economic situation in Syria slowly improves. Contruction and real estate were growth industries before the unrest began, outpacing Syria’s GDP growth and expanding at a rate of 8.8 percent a year, thus giving them a strong chance of bouncing back. This improvement would be crucial for the economy and jobs. According to the Central Bureau of Statistics (CBS), these sectors together employ 15 percent of the working population, meaning that many jobs are also at risk. Hilal hopes the BUILDEX exhibition will go ahead in 2012 after being cancelled in 2011. He says Syrians should stay positive. “We should pick up again as soon as overall regional conditions improve and more reforms are introduced,” he said. “Syrians should not give up.”
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16 May 2012
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