The real estate sector continues to draw attention from international investors in the region, which is welcome news as the kingdom looks to rebuild its property market following the global economic downturn of 2008.
Although Jordan has stood out as an example of relative stability for the region, in contrast to the political turmoil in Tunisia and Egypt at the beginning of 2011, regional instability has had an impact on investor sentiment.
Nonetheless, revenue from real estate trading increased 49% in February 2012 over the same period last year, rising from JD13m ($18.28m) in 2011 to JD19.9m ($27.99m), according to a recent report from the government’s Department of Land and Survey (DLS).
The DLS report also broke down the sources of foreign investment in Jordan’s real estate market. Iraqi nationals were the leaders for February, investing JD26.6m ($37.41m) into the market, followed by Saudi nationals with JD7.6m ($10.69m) and Syrian nationals with JD1.6m ($2.25m).
This recent activity continues a larger trend from 2011. The DLS reports that last year, investments from Iraq comprised some 56% of the kingdom’s foreign transactions, totalling JD252m ($354.43m). Saudi nationals took second place for that year, accounting for JD51m ($71.73m), while Lebanese nationals were the third-biggest source of foreign transactions, amounting to JD17.6m ($24.75m). Americans came in fourth, accounting for JD17m ($23.91m) in investments.
The high volume of transactions from Iraqis is largely due to Jordan’s trade relationship with the country, with Jordanian exports amounting to some $312m in 2010. A large influx of Iraqi refugees to Jordan has sparked real estate growth as well, further strengthening the economic linkages between the two countries, according to IHS Global Insight, an analysis firm.
The preponderance of regional neighbours investing in the domestic real estate market is also a product of Jordan’s stability, especially when compared with other countries in the region.
“If unrest in Syria continues, the Jordanian real estate market may become a more attractive proposition for investors in the Levant region,” Rami Adwan, the former deputy CEO of marketing and sales at Tameer Jordan Holdings, a local real estate development company, told OBG. “Although the Jordanian economy has been negatively affected by the outbreak of violence in Syria, these events have reinforced one of our competitive advantages in the foreign direct investment market: political and social stability.”
Rising foreign interest is a positive sign for Jordan’s beleaguered real estate sector. Other parts of the kingdom’s economy are looking less secure, however, which means real estate may have to power the economy through the short term. Due in part to regional unrest, remittances dropped 5.2% by the end of 2011 when compared to the previous year, falling from JD2.85bn ($4bn) in 2010 to JD2.4bn ($3.38bn), the local Al Arab Al Yawm newspaper reported. Foreign currency reserves also fell 12.3% over the same period, dropping to $10.7bn in 2011 from $12.2bn in 2010.
Moreover, recently released data from the country’s Department of Statistics indicated that Jordan’s overall economic growth rate remained slow at the close of 2011, coming in at 2.6% for the third quarter, with growth for the full year expected to amount to 2.4%.
A study by the International Monetary Fund (IMF) from February 2012 pointed out that the country may still have some rough days ahead.
“Regional political events with possible spill overs to Jordan – including unrest in neighbouring countries – could adversely affect economic activity through lower tourism receipts and foreign direct investment, and more costly access to capital markets,” the IMF said in a statement. “In addition, a deepening of the European crisis could indirectly affect Jordan, mostly through its adverse impact on regional oil exporters.”
However, as unrest continues in the region, the kingdom’s political reform measures, such as the elections draft law submitted to the lower house of parliament, should help the country to remain a stable centre of regional real estate investment as the year progresses.