Moroccans lead the way: Local demand fills the vacuum as fewer foreign buyers seek second homes

The luxury real estate market in Morocco has traditionally been driven by foreign buyers, especially from Europe, searching for a secondary residence. The economic downturn after 2008 altered the market when demand from these buyers declined sharply. Initially, local wealthy Moroccans were also reticent to buy into the luxury market, but this dynamic has begun to change.

INVESTORS: Foreign investment picked up towards the end of 2013. Current projections show foreign direct investment reaching between Dh15bn (€1.33bn) and Dh23bn (€2.04bn) in 2015. Foreign investors have focused on the high-end market due to its higher margins and developers have simultaneously increased the quality of the offerings on the market to attract buyers from abroad. Morocco has begun to face increased competition from other countries, such as Bulgaria, Portugal and Greece, where real estate is accessible for foreign buyers and which share a similar climate.

RESIDENTIAL: Luxury market activity is focused on Casablanca and Rabat, with Marrakech having shifted away from this segment for the time being. “Only a dozen of luxury villas are being delivered per year when the projects’ consistency accounts for hundreds of units,” Mehdi Ammouri, equity research analyst at CFG Group, said. Marrakech’s shift away from the luxury segment is explained by the current lack of demand from foreign buyers. Villa prices fell by 4.1% year-on-year (y-o-y) at the end of the third quarter in 2013, yet the number of transactions increased by 6% y-o-y to 405 in total. In 2013, the average price per sq metre of luxury real estate was between Dh20,000 (€1776) and Dh30,000 (€2664). Luxury segment players have completely recentred their strategy by developing nearly all their developments for a domestic clientele, and demand from local Moroccans proved strong in 2013.

The luxury market is limited to a very small portion of the population, estimated to number around 20,000. Groupe Alliances launched a 127-ha project in Rabat in 2013, which includes luxury lofts, villas and apartments. It is also expected to house a hotel and office demand from these buyers declined sharply. Initially, local space. It will undertake a similar type of project in Casablanca, which will be located in the heart of the city. In 2013, Palmeraie Développement, a real estate firm specialised in the luxury segment, announced the launch of five projects spread across Casablanca, Marrakech and Tangiers. The luxury real estate market was shaken up when Groupe Addoha, an industry leader, entered the market. Indeed, Prestigia, a luxury development group that forms one of the companies under Addoha, has already built 4500 units in the kingdom.

MEGA-PROJECT: Bouskoura Golf City, a 220-ha complex, is being developed by Compagnie Général Immobilière and Palmeraie Développements. It will be the largest high-end development ever constructed in the country. The project represents a total investment of around Dh5.5bn (€488.4m), and it will offer an 18-hole golf course, a five-star hotel, a clinic and a mosque capable of holding 650 people.

OBSTACLES: While a number of infrastructure projects have been rolled out, accessing credit for foreign buyers is more complicated than for local residents. “The real estate sector needs to improve transparency and availability of information in order to reduce the overall level of risks and attract more foreign investors,” Imane Kabbaj, managing director of CBRE, told OBG. Kabbaj added that CBRE was in the process of undertaking an initiative known as GIE StatImmo along with JLL, Carre IMMO biliers and Colliers to consolidate and harmonise data indicators for the local market.

COMMERCIAL: A range of hotels is expected to enter the tourism market in 2014, and in the medium term more generally. These plans are the result of positive future projections, which are partially the result of a government plan to boost the number of tourist arrivals to 20m by 2020 and which will focus on seaside resorts.

Indeed, a raft of four- and five-star hotels are planning on opening new establishments, which includes Mövenpick, Hilton Hotels, Four Seasons, Ritz-Carlton and Marriott International. The new hotels will be clustered mainly around Rabat, Tangiers, and Casablanca.