Study: Jordan has potential to attract long-term investors

(MENAFN - Jordan Times) The real estate sector in Jordan is among few markets in the Middle East and North Africa region positioned to attract long-term investments over the next few years, according to Jones Lang LaSalle, a Dubai-based financial and investment management company.

The report identified three main factors in determining the attractiveness of real estate markets to long-term investors: investment environment competitiveness, real estate market conditions and availability of investable products.

Long-term investors will assess the broader macroeconomic and investment environment within which real estate markets operate, which means that governments and regulators should build a transparent investment and business environment to encourage employment and population growth to attract such investors, the report said.

The study, issued in September, pointed out the Kingdom's ranking in the 2009-2010 Global Competitiveness Report, released by the World Economic Forum (WEF), in which Jordan was among the 50 most competitive countries in the world.

Jordan ranked 8th among Arab countries in the WEF report, which is based on 12 pillars of competitiveness, including institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market sophistication, technological readiness, market size, business sophistication and innovation.

Meanwhile, Jordan Investment Board CEO Maen Nsour said that strategic projects are currently in the pipeline, falling under several sectors, particularly the infrastructure.

"The Kingdom is continuously evolving towards upgrading the elements of a conducive investment and business environment, which is reflecting positively on Jordan's ability to attract long-term investors and quality investments," he told The Jordan Times on Tuesday.

Among the most problematic factors for doing business in Jordan are tax rates, inefficient government bureaucracy, restrictive labor regulations and access to financing, the report said.

According to Jones Lang LaSalle, Abu Dhabi, Dubai, Cairo and Casablanca are the best-positioned cities in the region to create the competitive conditions required to attract more long-term capital into their real estate markets.

The study indicated that recovery of real estate markets in the region after being hit by the global financial crisis is critical in attracting long-term investors.

Zuhair Omari, an expert in the property sector and president of the Housing Investors Society, said the market in the Kingdom is recovering, particularly during the summer season, which witnessed an increase in property sales that he said exceeded developers' expectations.

"Property prices in Jordan went down by 15 per cent this year compared to prices recorded before the middle of 2008," he noted, attributing the decline to the drop in prices of construction materials due to the global downturn.

The third factor considered in the Jones Lang LaSalle report was the availability of investable real estate, which is related to property prices in the region that are still not in line with market expectations.

"Even where pricing is competitive, assets are not being packaged in a way that provides the secure long-term leases required to underpin the stable cash flow sought by investors," the study said.

However, Omari told The Jordan Times on Tuesday that if the banking sector adopts easier lending measures associated with a longer repayment period of around 30 years, long-term investors will be tempted to enter the Jordanian market.

"Around 45,000 residential apartments are required to be built every year due to the annual 2.7 per cent population growth registered in the Kingdom," the expert said, saying that even during the boom the sector witnessed three years ago, this need was not met.

Meanwhile, Omari said that according to government regulations, lands in certain areas may not have buildings over four storeys, indicating that the cost of land represents 50 per cent of the apartment price.

"If the government allows the construction of more than four-storey buildings, property prices will go down further and the cost of land will not exceed 30 per cent of the property price," he explained.

Omari said that current investment laws are attractive to developers, noting that the government has recently taken decisions to boost the sector such as the exemption of more residential apartments from registration fees. The step, he said, helped the sector recover and increased apartment sales.

Late May, the Cabinet decided to widen the exemption on the first 120 square metres from apartments sized 150 sq.m. or less to apartments sized 300 sq.m. or less. The new exemption decision will only be valid until the end of this year.

By By Omar Obeidat