(Source: Omar ObeidatJordan Times (MCT) — Government policies are driving residential property buyers towards small-sized apartments, according to real estate developers.
Zuhair Omari, president of the Housing Investors Society (HIS), blamed the government’s decision that froze incentives given over the past three years to buyers of relatively medium-sized apartment, for pushing many Jordanians to purchase smaller units to benefit from tax and registration fee exemptions.
Currently, buyers of apartments sized 150 square metres (sq.m.) or less do not pay registration fees for the first 120sq.m.
In May 2009, when the real estate sector was stagnant due to the global financial crisis, the government decided to extend the exemption from registration fees on the first 120 sq.m. of apartments sized 150 sq.m. or less to apartments sized 300 sq.m. or less.
In June 2010, authorities decided to increase the size of apartments eligible to benefit from the incentives by exempting the first 150 sq.m. (instead of the first 120 sq.m.) of apartments sized 300 sq.m. or less from registration fees and slashed registration fees and taxes on properties from 10 per cent to 5 per cent.
According to Omari, the incentives used to save buyers of residential properties between JD4,000 and JD10,000 per unit depending on the size.
“Small apartments have recently become the most demanded because they fit financial capabilities of the vast majority of Jordanians,” he told The Jordan Times on Monday, warning that such a trend will have a negative impact on the social life of people as the average family-size in the country is around five members.
“Households find it hard to accommodate five members in one small residential unit,” Omari noted.
Rafat Abu Khalaf, a housing developer, said his company mainly builds 120 sq.m. apartments due to increasing demand on such apartments.
Saving around JD4,000 because of exemptions from registration fees means that buyers practically save double the amount as they purchase their homes through housing loans, he added.
Mohammad Qarraleh has recently bought a 156-sq.m. apartment, which means he had to pay full registration fees as the area of the unit exceeded the criteria for exemption by only few square metres.
“I had to pay around JD8,000 as registration fees because the apartment is not included in the exemption,” Qarraleh complained.
According to a report issued by the Department of Land and Survey (DLS) on Monday, the number of residential apartments sold in the Kingdom during the first six months of year was 10,887, a 23 per cent drop over the same period of 2011 when a total of 14,223 units were sold.
DLS figures showed that out of the 10,887 units sold between January and June of this year, a total of 7,210 apartments were sized less than 150 sq.m., the criteria that benefits from government’s incentives.
Demand for larger apartments compared with last year’s first six months dropped by 28 per cent, according to DLS.
Property trading down, prices up
The DLS report indicated that trading in the real estate sector during the first half of 2012 declined by JD986 million over the same period of last year from JD3.48 billion to JD2.49 billion, nearly a 30 per cent drop.
Omari blamed the sharp decline on freezing the incentives to homebuyers in addition to rising prices of residential apartments, which according to him went up in recent months by 10 per cent to 15 per cent.
The rise in values of housing units is attributed to the increasing prices of lands, which jumped by over 20 per cent, he explained, elaborating that land value represents around 50 per cent of overall cost of housing projects.
Omari indicated that land prices have gone up as areas served by infrastructure in the capital and regulated by Greater Amman Municipality (GAM) are fading.
“Homebuilders are competing for limited number of land spots in Amman. That’s why property prices are skyrocketing,” he noted, urging GAM and regulators to expand infrastructure services to areas around the city.
Describing demand on residential apartments as “OK” , the HIS head pointed out that many would-be buyers decide to fold their purchasing plans because “they get surprised” when told about property prices.
Registration fees and taxes also represent an “unreasonable’ share of the apartment price, he mentioned.
Although real estate trading went down, government revenues in the first six months of the year increased by 32 per cent when compared by the January-June period of 2011, according to DLS.
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©2012 the Jordan Times (Amman, Jordan)
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Source: Omar ObeidatJordan Times (MCT)
