An ever-changing skyline
≈ $1bn investment value
Construction is one of the main economic activities that continue to survive in the Palestinian market. It may grow, then shrink, but never disappears from Palestine‘s economic map.
One of the first scenes visitors notice when visiting the Palestinian cities of Ramallah and Al Bireh, is the plethora of construction sites for new housing projects, commercial or office buildings that are being built. This scene is repeated in other cities across the West Bank, which is great news for a sector that has at last started to flourish after years of struggle.
According to the results of a survey issued by the Palestinian Central Bureau of Statistics, the value of spending on the creation of new buildings and extensions to existing buildings in Palestine in 2013 amounted $931.1 million.
According to the results, the value of spending on the maintenance of existing buildings in Palestine, during the last year, amounted to $245.2 million of which $183.8 million were spent in the West Bank and $61.4 million in the Gaza Strip.
A recent workshop at the Institute for Research and Economic Policy, MAS, found that investors from the construction sector made huge profits during a relatively short period of time (c.6 years).
In another workshop conducted by MAS, the issue of a potential construction housing bubble was raised by researchers and investors alike. In Ramallah and Al Bireh alone there are 5,000 empty apartments and yet construction of new developments continues.
The positive side to this is that the sector employs many people, but on a temporary basis (as long as the construction takes to complete).
In the past few years, Palestine has witnessed the birth of its first newly planned Palestinian city, “Rawabi”, and the rising trend for building new neighbourhoods on the outskirts of Ramallah and Al Bireh and elsewhere such as Al Rihan and Al Ghadeer.
In a statement made by the Palestinian Contractors Union’s Chairman, Jeryes Atallah, he highlights that the increase in demand for real estate is noticeable, especially so for residential projects with prices increasing 30% over the past six years.
Atallah said, “The real estate sector has witnessed a boom since the easing of conditions following Al Aqsa Intifada, which lasted from the year 2000 until the end of 2007, to reach an astonishing $931 million spend this year”.
Constructing a house or owning an apartment is top of the investment wish-list for Palestinians, as it’s considered as a refuge in times of distress or political instability.
Mohamad Imran, a young employee, explained how he feels; “It’s so important to have a house or an apartment, even if it takes me twenty years to repay the mortgage, in case of problems, I’ll still have a roof over my head”.
Furthermore, and according to the Palestinian Central Bureau of Statistics, the number of building licences issued for the construction of residential and non-residential use totaled 2,445 during the first quarter of 2014, of which 1,690 were for new buildings.
Licences issued during the 1Q2014 (first quarter of 2014) increased by 14.4% compared to the 4Q2013, but recorded an increase of 7.2% compared to 1Q 2013.
The total area of the buildings (residential and non-residential) amounts to1.149 million m2, of which 993,000m2 are new buildings and 156,000m2 of existing buildings.
The number of authorised housing units reached 4,646 with a total size of 827,000 m2, including 3,804 new units with a total area of 687,000 m2.
This record number of new housing units rose by 30% during 1Q2014 compared with 4Q2013, and also recorded an increase of 19.9% during the 1Q2014 when compared with 1Q2013.
With all the challenges that come with an increasing demand for construction, especially those that experts call badly managed projects that could easily become “investment graveyards” (see our previously published article in issue 2) the total value of construction projects in Palestine last year still increased by around $50 million from the previous year, having reached $881 million during 2012.
One of the main reasons for this boom is the banking facilities offered by those banks operating in Palestine since 2008 to increase demand for real estate, especially since some offer buyers a repayment period of up to 25 years. In addition to the insecure investment environment, there is also the difficulty of opening large industries and factories due to several reasons relating to the political situation and the size of the local market.
According to figures issued by the Palestinian Monetary Authority, at the end of last year the total of real estate and housing loans reached $650 million, compared with $590 million in the previous year, in comparison with the total for real estate and housing loans during 2008 was about $188 million.
Construction in Gaza
According to a survey published by the Palestinian Union of Contractors, there are currently 130 projects worth a total of about $150 million.A third of these projects are private projects: construction of housing by individuals to meet the natural growth in population in the Gaza Strip. These projects are estimated to be worth about $200 million.
However, and due to the restriction on the entry of all construction materials to Gaza (by Israel), the number of stalled construction projects is considerable – with an estimated total value of about $800 million.
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