Jordan King Abdullah 370.
(photo credit: REUTERS/Shannon Stapleton)
AMMAN -- Jordan's once booming
real estate sector is struggling under political and economic uncertainty
while, citing the crisis in neighboring Syria, investors and bankers are
predicting difficult times.
Figures released by Jordan’s
Department of Statistics in early September showed that real estate trade
volume dropped by 25 percent during the first eight months of 2012. Trading in
property fell to $4.9 billion, down from $6.1 billion during the same period of
civil war showing no signs of abating, investors are playing “wait-and-see”
amid widespread public concern that the spillover from Syria will be
violent and taxing to the kingdom. Sameer Abu Ghalyoun, a member of the Jordan Society
for Real Estate Investors said the drums of war beating in Syria are echoing in Jordan, spreading panic among
residents and investors alike.
"People are no longer
certain about what the future holds,” Abu Ghalyoun told The Media Line. He
said, “They fear a major outbreak of violence due to the close connection with Syria," and predicted that the situation
will continue unchanged as long as the unrest in Syria remains unresolved.
The past decade has been good for
the industry, the real estate sector’s steady growth attributed to the
kingdom’s political stability in a region teeming with unrest. Following the
American invasion of Iraq,
scores of wealthy Iraqis arrived in Jordan, driving up the price of
land and fueling a major real estate boom.
Traders say the Iraqi war drove up apartment prices three times over the
past decade, and were hoping the unrest in Syria would cause the same scenario
to play out. But not anymore.
“Iraq's scenario was different. It
is far from Jordan and there
was no direct security impact as is the case with Syria,” said Abdul Rahman Saudi, a
prominent real estate investor.
Investors from the Gulf States, who have
been injecting hundreds of millions of dollars into local real estate projects,
have now been looking elsewhere in order to escape from shadows of uncertainty being
cast over the Jordanian real estate market by the Syrian instability and the
threat to its neighbors. “Real estate boomed in past years following the
arrival of investors from Qatar,
Kuwait, Dubai and other countries, but not anymore,”
Saudi told the Media Line.
Additionally, the global economic
crisis worsened position of local investors who struggle with banks reluctant
to grant them loans, investors say. The Central Bank last year improvised
measures to spur growth in the real estate sector through tax exemptions on
small-sized properties. The move helped to boost demand for a good part of last
year, said investors, but the difficult economic situation, lack of foreign
investment and increasing poverty has impacted on the purchase power of
A senior banker at the Arab Bank,
largest commercial banking institution, said the combination of a difficult
economic situation and the political uncertainties are causing banks to
worry. The banker, who could not be
named because he is not authorized to speak to the media, explained that, “Banks
feel they are running a high risk by giving loans to a sector that looks to
suffer in the short term. But many banks find themselves forced to do business based
upon the hope of improvement in the midterm.”
Despite the drop in the volume of
trading, the Jordanian government generated more cash this year than last after
imposing higher taxation on real estate trading; giving incentives to non-tax
payers; and reducing tax exemptions by 20 percent. The government said it
generated nearly $282 million in tax revenue, compared with $200.4 million during
the previous year.
Historically, governments have often
resorted to wiping out taxation worth millions in order to buy the allegiance
of influential figures and tribal leaders, a policy that has been condemned by
the opposition as a form of corruption.
Meanwhile, the real estate sector
is facing a temporary halt in its activities due to strike by workers at the
Department of Land and Survey (DLS). Nearly 1,500 employees of 34 government
offices have are striking for improved pay while the government responds that
it has no funds to meet the demands. It claims to have lost more than $141
million during a single week of striking, but expresses optimism that it will
regain the lost funding when the strike ends.The drop in real estate trading
also comes despite an influx of Libyan investors who fled to Jordan to
wait-out a return to stability following the revolution that saw the removal of
strongman Muamar Gaddafi. Yet, foreign investment remains a bright spot in
the realm of real estate. The Libyans, along with Arab-Americans and Jordanian
expatriates living in the Gulf States
form the basis for the foreign investment
For more stories from The Media Line go to www.themedialine.org
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