The Ethiopian Real Estate Market Slows
As in many countries of the world, the Ethiopian real estate has been booming for much of this decade. In many areas, prices doubled and even tripled in a span of a few years. The highest appreciation in home prices occurred in the five-year period between 2003 and 2008.
Home prices vary widely from region to region. Even within the same city, there can be wide variation in home prices. Homes in upscale areas such as Bole in the capital are worth much more than homes found in outlaying areas. In Bole, a Four Bedroom, Two Bath home over 500 square meter plot of land can fetch 3 million ETB (or US$ 300,000).
The real estate brokerage business in Ethiopia is not as well developed as in other countries. Buyers and sellers rely on agents locally called Delalas for buying and selling homes. These are traditional agents with no formal education in real estate but who basically mediate between buyers and sellers. A great deal of negotiation is involved in buying homes. Asking prices can be as high as 50% more than the final sale prices.
Delalas play critical role in convincing both sellers and buyers to come to terms. Normally, Delalas do not help you in completing the legal paperwork needed to complete the transaction. This must be done by the buyer and seller themselves and may take several months. It is very important that buyers check the authenticity of seller documents. Otherwise, they can waste crucial time and/or money in such endeavor. People who are less skilled with the Ethiopian bureaucracy may seek the help of legal assistants locally called Guday Asfetsami.
Home mortgages are almost none existent in Ethiopia. Most real estate transactions are conducted on cash basis. This has limited the liquidity of homes but it may also have prevented the kind of real estate bubbles we witnessed elsewhere. Mortgage financing may be obtained for some homes, primarily for new homes built by developers. These companies negotiate financing terms with local banks in advance for all of their clients, current and future one. They basically arrange group deals for those who can put the required down payment. Down payments vary from 20 to 40%. Although most mortgages are for 10-20 years in duration, some companies arrange mortgages for as long as 30 years. Typically, interest rates are variable and depend on the prevailing interest rate fixed by the central bank.
It is estimated that there are about sixty local and six foreign real estate development operators in the country (with a registered investment capital of close to 1.6 billion Birr, or US$160 million). A major problem with homes built by these companies is the time it takes for completion. In the past, some of these homes were completed many years past their due dates. And some never made it to completion.
The real estate boom has slowed considerably over the past year or so. And the ones most affected by the slowdown are the real estate developers. The Ethiopian diaspora has been the main client of these companies, and most of these clients have been from the United States which is in severe economic downturn currently.
Over 70% of our clients are from the diaspora, 50% of whom are living in the United States, said Samuel Taffese, proprietor and managing director of Sunshine Real Estate Plc, which last year handed over 166 G+1 houses and 26 apartments to customers. The real estate market has failed to secure new customers from the diaspora because of the financial crises. Likewise, Ropack International Housing Project, a South Africa-based company engaged in real estate development in Ethiopia, is also unable to collect payments for some 360 residential houses it built over the last few years.
Who can buy homes in Ethiopia? Anyone can by homes in Ethiopia as long as he/she is an Ethiopian citizen, foreign national of Ethiopian origin, or has Ethiopian parents. To see the latest listing of residential and commercial properties for sale or rent, please visit Ezega.com at http://www.Ezega.com/RealEstate/Index.aspx. This site is the largest real estate portal in Ethiopia and lists hundreds of homes for sale and/or rent at any given time. Anyone can register and post properties for sale or rent for free.
Article from: www.1888pressrelease.com