Oct 2008 By Rami Batarseh

Have you noticed how many For Sale & For Rent signs are there in Amman latley? Does it seem like every other building is for sale or rent? The sign vendors are happy because they cannot keep up orders. The sad thing is that once we put a sign on a property, it rarely gets removed. This has nothing to do with our marketing or sales capabilities at Cityplex. Our database of available properties for sale has been consistently on the rise, for every 10 sellers that walk into our office to list a property we have 1 buyer asking for it. Our job has never been more difficult, there is simply too much inventory for the current demand. It is quite clear that the real estate market in Jordan is going through a correction phase. In real estate world we use “absorption rate” to measure the performance of the real estate market. Absorption rate is the number of months it will take to “absorb” the current inventory. It is the best indicator of whether that market is a “seller’s market”, a “buyer’s market”, or a “neutral market”, defined as follows:

Seller’s Market – Absorption Rates 1- 4 months Neutral Market – Absorption Rates 5 - 6 months Buyer’s Market – Absorption Rates 7 + months

We estimate the absorption rate for commercial real estate Amman is 24 - 36 months! In other words, if no more buildings enter the market, it will take 2-3 years to sell or rent the current inventory. Furthermore, the asking prices are simply unaffordable. For example, in some parts of Mecca Street property owners are asking JD600/sqm/year for ground retail space, which means if you rent 100sqm space, your annual rent is JD60,000. I wonder what type of business can sustain this kind of rent. And if they do, I wonder how long they will last.

In the last 5 years, there were 2 types of buyers of real estate: 1) Investors who bought properties to flip later at a profit, and 2) Users who buy property for a need, either to run a business or to live in it. We estimated that 70% of the buyers in the last 5 years were Investors and 30% Users. Now that the market has slowed investors pulled out, and we are left with only users, effectively we lost 70% of the market. Now that the party is over, we will go back to the basics, and the fundamentals of real estate will prevail again. A property is worth only what someone is willing to pay for it.

Here are the top 10 Pick for property owners today:

1. Stop dreaming of 2006 & 2007 prices, they’re not coming back
2. If your neighbor is asking a crazy price, you don’t have to
3. If once you were offered a high price, why didn’t you take it?
4. Reducing your asking price isn’t an insult, it smart business decision
5. Real estate prices don’t always go up, often times they go down
6. Tenants are your clients, service them right, they pay your bills
7. There isn’t enough “foreigners” to rent all the properties in Jordan
8. Don’t count on political instabilities to improve your property
9. A vacant building is a dead building, rent it at any cost, bring it to life
10. Stop believing that your property is the best one in Jordan