Monday, September 2, 2013

Moved 2 Maputo

I've never been to Mozambique, but earlier this summer, both the title and the subject matter of this entry to The Economist's Baobab blog, titled 'Moving to Maputo" both hit home. The topic was the increasingly-common phenomenon in African capitals, where international-standard residential properties (those that ex-pats find suitable) sell or rent for prices comparable to apartments and houses in international cities in Europe and North America:
A thriving expat community has developed around the university, but few Mozambicans can afford to live there. Rents have increased dramatically over the past four years; purchase prices have doubled. 
“The most common type of property has three bedrooms and we are talking about $3,000 per month onwards,” says Gonçalo Marques, a local estate agent. “You can find properties in prime areas for $7,000 per month. For purchase prices you’ll find that the same property might be sold for about $500,000—sometimes more.” 
The arrival of migrants from rural areas and abroad has pushed up demand for housing. Attracted by strong economic growth and a common language, highly skilled Portuguese migrants have been increasingly flocking to their former colony over the past two years, as their own economy remains ensnared in the euro crisis. Registrations at the Portuguese consulate in Maputo rose by 25% in 2012, and the trend is expected to continue. 
The cost of living in Maputo has surprised some migrants. “I live in the centre of Maputo. The centre of town is not very big and the rents are so high,” says Ana Oliveira, who moved to Mozambique from Portugal three months ago. “You need to share the apartment with three or four people.” Landlords have started to demand that tenants pay six months’ rent, or more, up-front.Many have relocated to neighbouring Matola, where housing is cheaper. But now prices in Matola are rising, too. “A property that was on the rental market there two years ago for $1,500 a month might now be on the market for $2,500,” says Mr Marques. 
As new residential developments reach completion, the situation could change. The construction sector, having stagnated for decades, started to pick up two years ago. Encouraged by rising prices, developers have piled into the market. 
But while overall prices may be dragged down, the new developments are targeted exclusively at high-end buyers. “The number of people that are able to buy a property worth $500,000 is small,” says Rui Carrito, head of the Portuguese construction company Soares da Costa in Mozambique. 
“What you need is small, cheap houses for the people but you don’t see anything like that.”Buying a home is all the more tricky because the value of the property cannot be used as collateral for a loan. Interest rates for personal loans—when they are available—are around 20%. Until prices come down and ordinary people gain access to financing, most Mozambicans will continue to struggle to get a foot on the property ladder.
Foreigners settling in Monrovia in the last decade have experienced similar astronomical price points for apartments with security and reliable utilities, even as supply has expanded constantly (there have been at least 20 new multistory apartment buildings added to Mamba Point and Sinkor in the past year). About $1,500 per month per bedroom is pretty standard, depending on the number of hours of electricity available, and perhaps the age and condition of the building (even lavishly-featured multi-story structures that are only a few years old often show the wear of the extreme climate and shoddy construction).

Like Maputo and other cities, Monrovia has two completely different real-estate markets, with a high-end catering to wealthy foreigners who expect the closest possible semblance to their accommodations back in Washington, New York, or London, and a local housing profile for Liberian nationals, which ranges from newly-constructed homes for those with sources of income to the innumerable informal structures which house the majority of the city's people, from the city center to its expanding edges. I struggle to call this a "market," due to the ubiquitous quagmire of land ownership uncertainties, disputes and scandals, real estate purchases only happen at the suburban fringes of the capital. Hence, 'The Two Monrovias.'

Exasperating all of this, Monrovia suffers not only from the financial and judicial constraints of mortgage lending mentioned in reference to Maputo above, but also from a scarcity of land whose chain of ownership can be reliably verified. Finding a secure property to buy or lease is unusual for developers, squeezing supply and adding to costs. In my anecdotal observations, as prices for ex-pat style apartments and leases have skyrocketed in the last few years, some property disputes seem to have been solved, or at least, the owners have gotten their act together (whether simply returning to Liberia from abroad to facilitate the development of their property, or coming to an agreement in a family dispute to share revenue from a lease instead of endlessly arguing).

Monrovia remains a small market at the top end, with limited demand (which I don't see growing as the population of expatriates, and the presence of foreign NGOs and concession companies has stabilized), so it hasn't seen the prices of places like Lagos, Maputo, Accra or Luanda. I've long heard predictions of a price-crash when UNMIL leaves, I am not sure how much housing UNMIL or its personnel lease; and wonder if perhaps the rapidly-deteriorating earlier stock of multi-story structures will be priced for the secondary, local market instead of being upgraded again for ex-pats.



2 comments:

Our Man in Africa said...

It's interesting comparing with Abidjan. Comparing notes with journalist friends who've come from Monrovia they remark that you get a lot more for a lot less in Abidjan (and with reliable water and electricity). Anecdotally Abidjan seems to be rather different in this regard from many African cities - perhaps it's the existence of a large middle class, and a long history of a strong ex-pat population, and a decline in expats and international institutions due to the crisis. That may change when the AfDB comes back.

MM Jones said...

I think you're right on the fundamentals with Abidjan, John. It's simply much easier to build there, and there is an ageing but existing stock of higher-end property from 10-20 years ago when there were tens of thousands of expat French in the city, a population which still hasn't re-approached that peak. Monrovia, meanwhile, is struggling under the weight of a million people when any urban planning the city enjoyed ceased a quarter-century ago when the city had barely a quarter of that population. That's a common ailment of many African cities. Thanks for the comment! Matt

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