Rising interest rates, war on Gaza impact housing market

AMMAN — The local housing market activity in 2023 dropped by 4 per cent, compared with the same period last year, due to increasing interest rates and political unrest.  

Osama Abbasi, a land developer, told The Jordan Times that “the housing sector began to show signs of weakening growth in light of unprecedented rise in   US interest rates… this had ripple effects on both the investor and buyer”,

The rise has led to repayment period extension for the investor and buyer, which leads to limited credit access and difficulties in planning their finances.

 “The investor now receives lower levels of revenue which sometimes does not even cover the cost of capital,” Abbasi said.

The ongoing war on Gaza incited a market shift given that politics has a direct impact on the economy. 

“For buyers, it is currently better to keep the cash than to purchase new properties,” Abbasi said.

Former president of Jordan Housing Developers Association (JHDA) Kamal Awamleh, told The Jordan Times, that “among the main reasons why the overall trading volume in 2022 was higher is because the sales tax and property transfer fees increased”, noting that in 2022, particularly during the first half of the year its percentage was 4.5 per cent, whereas now it is 6 per cent.

He said that the declined activity this year is a result of continuous growth in interest rates. Monthly instalments increased by JD150 making it difficult for borrowers to afford payment. 

“The political factor cannot be ignored and there will definitely be further declines and challenges,” he said.

A recent report issued by the Department of Land and Survey revealed that the volume of trade in the local housing market during the first 10 months of 2023, reached JD5.896 billion. 

The trading volume during October increased by 3 per cent when compared with September, accounting for approximately JD629 million, the report added.

The report ruled that real estate activity has declined by 2 per cent in October when compared with the same period last year, but in turn, trade activity increased by 7 per cent in September when compared with the same month of 2022.

“The overall trading volume in the first 10 months of 2023, fell by 4 per cent,” according to the report which showed that apartment sales decreased by around 6 per cent, while land sales declined by 4 per cent, when compared with 2022.

As for the value of earnings during October, it fell by nearly 2.5 per cent when compared with the same month of last year, and increased by 18 per cent during September, the report revealed.