We are in a recession

It is common knowledge that the real estate sector in Jordan has been hit hard over the past two years. It comes as no surprise, therefore, that housing developers in the county have been looking for other markets outside Jordan to invest their money.

According to President of the Jordan Housing Developers Association (JHDA) Zuhair Omari, the country may have lost about JD400 million's worth of investments in the housing sector as Jordanian developers have been busy investing their money in neighbouring countries, notably Dubai, Turkey, Egypt and Cyprus. Housing developers are "tempted to leave the local market because their business is taking the biggest hit that has been recorded in years", said Omari

Where Omari may have gone wrong was when he attributed this big loss of investments to some zoning ordinances that require apartments of the B, C and D categories not to be less in size than 110sq.m and 130sq.m for the grade A class. With all due respect to the president of the JHDA, it is not so simple to attribute the large diversion of Jordanian housing investments to neighbouring countries to just some zoning rules. The complained about zoning regulations could be a contributing factor to the decline of investment in the housing sector, but not the real reason. More profound reasons could be attributed to the overall poor economy of the country, high taxes and  unemployment, as well as low incomes.

Let us face it, we are in a recession. The housing markets in Turkey and Dubai are obviously more attractive as the returns on investment in these countries are rather high. There is, therefore, no easy fix for this problem, as the underlying reasons are complex and multidimensional. Above all, the national economy is indeed in a poor state, and the repercussions of this pervasive economic challenge are widespread and affect all sectors of the national economy, not just the real estate and housing sectors.

Talk of new taxation law and how to increase taxes drives any potential investor to foreign lands to invest their money. The solution for the poor performance of the real estate and housing sectors is, therefore, the same for the other branches of the national economy. Once the economy regains momentum by introducing a stimulus package, then these problems will solve themselves.