The Real Deal

According to the Africa Housing Yearbook 2014, in Africa robust annual growth of the construction industry, at 10%, is propelled by vast infrastructure investments. Yet the housing construction market is still the domain of SMEs. All land in Mozambique is state-owned, with utilization rights obtained through a long-term title, the DUAT. Therefore, while construction and assets can be mortgaged, land cannot. Current Global Housing Indicators suggest that 20% of all properties are registered.

To this day, the vast majority of households are responsible for constructing their own homes, which are often built incrementally, and added to or improved as and when resources avail themselves. And due to the greater formalization of urban land housing finance is essentially an urban issue, although as Mozambique’s extractive revenues benefit a broader swathe of the population, the rural areas, too, will demand better housing. It follows that loans for home construction greatly exceed mortgages, and the Africa Housing Yearbook 2014 published by the Centre for Affordable Housing Finance, reveals that 7.3% of the top 60% of earners, and 2.4% of the bottom 40% had such a loan.

IN RESIDENCE

Rental prices in Maputo as of February 2015 based on Numbeo research of 240 samples came in at MZN44,200.00 ($1.00 = MZN33.8616), or $1,303 for a central one-bedroom apartment and $649 outside the center. Three bedroom apartments in central and outlying Maputo averaged at $2,883 and $1,550, respectively. The price to buy a centrally located apartment in Maputo averaged at $1,180 per sqm. Meanwhile for Mozambique overall the sample returned average rental prices for a city center and non-central one-bedroom apartment of $901.4 and $626.8, respectively, and for a city center and non-central 3-bedroom apartment of $1,842 and $1,240, respectively. And to buy an apartment centrally and non-centrally located averaged at $950 and $636 per sqm. Average monthly disposable salary (after tax) in Maputo is at $982, and for the nation overall at $803. Yet with average mortgage rates for Maputo and Mozambique respectively at 20.67% and 20.50%, few can take out a home loan.

At the top end of the market, prices for 5-bedroom houses in the affluent suburbs of Sommerschield 1 and 2 command rent of around $6,000 per month, and even greatly above $10,000 per month. Meanwhile, another driver of housing demand is the tendency for some owners to double up the house as an office to reduce the cost of living and circumvent the lack of office space.

Most of Mozambique’s 18 commercial banks offer a mortgage product, but the mortgage loan to GDP ratio is at just 0.6%. UN-Habitat data on the extent of housing lending suggests that banks’ mortgage portfolios represent 8.3% of total loans to individuals. Some banks today offer rent-to-buy plans offering an option to buy at the end of a lease. Banco íšnico, is cited as an example, having signed a deal with the Fund for Housing Promotion (FFH) to lease apartments in Maputo’s Olympic Village where the monthly lease registered at around $317 for 25 years. The FFH has penned agreements with five banks to provide loans to individuals for the purchase of housing units in the Intaka project in Matola, where 25-years loans ranged from $60,000 to $80,000 at 19% interest. Other projects of shorter terms offered higher rates of around 22.5%.

To put mortgages into perspective, however, while Mozambique’s minimum wage was revised to $95.3 in April 2014, most citizens earn less than $60 per month. Those banks offering mortgages stipulate a minimum loan of $9,497, at 19% interest, and repayable over 25 years. This is only financially realistic to a household with a monthly income of about $1,425. UN-Habitat points to a typical upper middle class income of $1,472, at which level, “the maximum mortgage that could be achieved—assuming an 80% loan-to-value ratio over 20 years at 19% interest—is about $34,821.The family would need to save a further third of the purchase price to cover the deposit requirements, registration costs and taxes, and valuation and origination fees.” according to the Africa Housing Yearbook 2014.

Zubeyir Değirmenci, General Director and Member of the Board of Deco Group informed TBY of the group’s prestigious 23-floor building of 42 apartments. Testament to the demand for quality construction in Maputo, the scheme sold out prior to completion. Meanwhile, its Assos seafront condominium project with 160 apartments on a 45,000sqm area. “This project won the African Property awards for the best apartments in Mozambique.” And at the other end of the spectrum, Zefanias Muhate, Executive Manager of 100% Mozambican company Lis Moçambique, has undertaken: “…work for Henan Gou Ji, a Chinese company engaged in a landmark project called “5,000 houses”. The project is a joint venture with the Mozambican government’s Housing Promotion Fund (FFH), which is the agency overseeing.

…AFFORDABLE PUBLIC HOUSING

Recent FFH estimates suggest a housing deficit of 2 million units, with over 13.5 million people, or 60% of the population living in inadequate housing. Mozambique’s first housing policy and strategy was approved back in 2011 and conforms with the national Agenda 2025. It champions the construction of adequate and affordable housing for all strata of the population, recommending improved land management, and accessible financing resources. Few private projects address affordable housing, but Casa Jovem in Costa de Sol Maputo is nonetheless one of several examples. The 36-hectare housing project under development on the outskirts of Maputo features 1,680 apartments and 300 houses. Apartments range in price between $47,000 and $130,000, it is out of the reach of most Mozambicans. The government’s 2010—14 program envisaged constructing 100,000 houses, and ran parallel to the Plan for the Young, Civil Servants, and Old Combatants, where 20% of planned housing was to be realized by the state, 30% by the private sector, and 50% by residents themselves through self-construction. Just 5% of homes were to be entirely subsidized. Among a list of partnership projects to boost the quality housing stock the FFH has signed agreements for a social housing scheme in the provinces of Cabo Delegado, Nampula, Tete and Maputo involving the construction of 50,000 housing units at a cost of $5.5 billion.

OFFICE PARTY

The office segment of Mozambique’s real estate market has indeed been in party mode. In Maputo the average rental price ranges from $2,000 to $3,200 per sqm according to consultancy firm Prime Yield Moçambique research, and is set to stabilize over the next five years as new stock is added; industry experts certainly do not expect the sound of a bursting bubble. The Mozambique Real Estate 2013 study identified Bairro Central B and Polana Cimento B, as the cheapest areas with average rent of $2,000 per sqm, and Sommerschield the most pricey at an average of $3,200 per sqm. Total office space in Maputo is put at roughly 337,000sqm.

FROM STORE TO STORAGE

The retail market has been slow to take off because of the large size of the informal sector. However, there has been a flurry of recent activity, which has seen South African retailers, in particular, entering Mozambique. Most retail developments are out-of-town on the main arterial routes. Shopping centers taking the form of mixed-use developments include the Polana Shopping Centre and the Maputo Shopping Centre, and more recently the more upmarket Marés Shopping Centre. Retail rents average at around $30-$40 per sqm per month, and the future looks bright as the middle class finds itself with more disposable income and retailers seek more prime venues to broaden their offering.

Afribiz notes that the congestion charge on commercial vehicles in the Maputo and rising land prices have seen much industrial relocation to the urban periphery. Moreover, former industrial areas in central Maputo in proximity to port and airport are more frequently being transformed into upmarket office or retail warehouse uses. Prime warehouse rents are on the rise and at around $10 per sqm per month.

Mozambique’s extractive boom has seen the steady arrival of companies and the expatriates staffing them, who traditionally demand higher quality property. And as supply has fallen short of demand, a busy period of growth in property stock is on the cards. Therefore, the property market remains an investment option of some appeal; a proposition, according to propertymaputo, that is not confined to the capital city, now home to 2.5 million people. Triunfo, a northern coastline suburb of Maputo, has become a source of prime real estate, due in large part to the construction of a ring road. Moreover, around 500 million has been spent on rural electrification, which will enhance both the life of the rural population, and inevitably see property spread beyond today’s popular cities.