Real estate The price of materials disrupts the market

How the real estate market works continues to be a mystery to analysts. Correlation of prices and demand, adaptation of supply to the economic situation… Today it is the “input” factor which accentuates an activity that has experienced little-known stagnation over the past 20 years. According to the various banking institutions surveyed by L’Economiste, applications  for real estate development loans have fallen by almost 100%, on the other hand, applications for building market authorization have fallen by 40%. Suffice to say that the current situation is serious for the industry.
“It should be noted that this vertiginous rise in the price of raw materials is not only attributable to the conflict in Ukraine”, explains Anis Benjelloun, vice-president of the National Federation of Real Estate Developers (FNPI). According to him, a significant increase was felt from mid-2021, reaching stratospheric levels. Thus, the price of concrete reinforcing bars (rebars) increased from 6,200 MAD/Ton to 14,000 MAD, an increase of 200%, and the red brick also experienced an increase in its value (1.10 to 2 MAD per unit). Red wood, which was 52 MAD per linear meter, is now worth 220. Moreover, glass has gone from 40 MAD per square meter to 200 MAD for the same order of magnitude. PVC tubing for piping and copper for electricity also increased by 50%.

Not to mention cement and ready-mixed concrete which reached 880 MAD/Ton versus 720 MAD previously. These increases, combined, mean that a dwelling of 100 square meters costs 50,000 to 80,000 more Dirhams to be built  As far as  low income housing is concerned, it costs now 20 to 25,000 more Dirhams to be built. According to the FNPI, the operators have not passed on these prices to the end consumer, because, according to Anis Benjelloun, “purchasing power cannot follow suit”. From a statistical point of view, this is confirmed. Indeed, according to the latest bulletin from the central bank (Bank Al-Maghrib) and the Land Title Agency (Conservation Foncière), in the first quarter of 2022, the Real Estate Asset Price Index (IPAI) recorded a quarterly drop of 0.3%, an increase in line with the decrease in residential prices by 0.3% and goods for professional use by 2.5%. On the other hand, land prices stagnated. At the same time, the number of transactions fell by 10.5%, with a decrease of 9.8% for residential transactions, 11.2% for land-related transactions, and 13.5% for goods for professional use. In the face of such a situation, a deafening silence from the line ministry is to be observed. Professionals are indeed proposing, in view of the economic situation, a postponement of the deadlines for the delivery of  low-income housing, in order to enable operators to free up liquidity, as well as a reduction in registration fees and those relating to registration with the Land Registry agency. Some people within the Federation even “have suspicions that some unlawful price-fixing agreements exist among suppliers, in particular cement manufacturers”. The Competition Council has indeed heard certain real estate developers, following a complaint filed by the FNPI. Their purpose is to initiate a procedure leading to sanctions for anti-competitive practices. Prices having increased gradually and simultaneously among all operators who come upstream of the construction process. However, given the behavior of the real estate market, some people cast the same suspicions on the real estate developers themselves. A hypothesis ruled out by the FNPI. Anis Benjelloun assuring that “more than 1,000 operators cannot practice unlawful price-fixing agreements”. 

Abdessamad NAIMI