PETALING JAYA: Demand for affordable new homes in the Middle East and North Africa (Mena) region far outstrips supply as the region’s population grows at double the world’s average growth rate.
According to a report published by global real estate investment and advisory firm Jones Lang LaSalle, there is a combined shortage of more than 3.5 million affordable dwellings across the major markets within Mena, and demand will continue to outstrip supply for at least the next five years.
The report on “Why affordable housing matters for the Middle East and North Africa region” focuses on seven major markets — Egypt, Iraq, Morocco, Saudi Arabia, Bahrain, United Arab Emirates (UAE) and Oman. It summarises the demand for housing in these markets.
According to Deepak Jain, head of Jones Lang LaSalle’s specialist team on affordable housing, this segment is a major opportunity in the real estate industry.
“As focus shifts away from top-end luxury developments, Jones Lang LaSalle estimates that the provision of sufficient levels of affordable housing represents probably the single greatest opportunity for the real estate industry in Mena at the present time,” Jain said.
“There is currently a marked shortfall of affordable housing in all the major markets across the region and governments are responding to the need to provide sufficient levels of affordable housing to address one of the key social issues facing their respective populations,” he added.
The report found that Egypt has the highest shortage of affordable homes in the region and the government has made an effort to build one million such new residential units across 32 cities.
Morocco has the most mature affordable housing market in the region. Despite a wide range of initiatives by the government, including tax rebates for private developers, there still exists an estimated shortage of up to 600,000 affordable homes.
With an estimated shortage of 400,000, the Saudi Arabian government will provide more homes as part of its US$133 billion (RM424 billion) financial and social stimulus package while Bahrain has already allocated US$10 billion for affordable housing as part of it stimulus package with an estimated 40,000 units to be built.
The UAE government faces an estimated shortage of 20,000 new homes predominantly in Abu Dhabi where the lack of affordable housing has resulted in “high levels of shared accommodation”.
However, according to Jones Lang, there is no single definition to what constitutes affordable housing as different markets have different interpretations. “It is generally incorporated as social housing for those who have no ability to pay market rates and low-cost housing for those with limited incomes who are also unable to afford market prices or rentals.”
Jones Lang suggested that governments provide more support as sufficient housing may not be provided without assistance and incentives.
“Governments should look to promote a more active mortgage sector and other associated initiatives to stimulate and grow the availability of low-cost housing finance,” it said. Furthermore, the report suggested that local communities be more actively involved, “in order to highlight the need for better urban design and community development to avoid the creation of residential ghettos”.
It also recommended that governments implement a wider approach to urban planning by broadening the existing framework beyond the vision of current metropolitan areas.
Jain said there is a need to re-think national housing policies and development programmes as demand for more affordable housing increases across the region.
“While governments around the region have started to allocate significant financial resources to address the shortfall in affordable housing, the challenge extends beyond an investment issue. We believe governments should get more involved to avoid the high social and economic costs involved in the current piecemeal approach where most sites for affordable housing are located in remote and inaccessible locations. The scale of demand requires a much more strategic and inclusive form of management to boost supply and ensure the right kind of developments are built in the right places that people can afford,” he said.
Jain added that for cities to be successful and operate in a more efficient and effective level, affordable housing needs to relate to the target market in a broader range.
“There is a need to re-think the existing relationship between governments and the development industry to create more attractive and effective investment agreements that harness the abilities of both to provide the best affordable housing that people actually need and want,” he said.
This article appeared on the Property page, The Edge Financial Daily, October 7, 2011.
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