North Africa faces testing time

Blair Hagkull, managing director of real estate consultant Jones Lang LaSalle in the Middle East and North Africa, says the speed of construction is slowing across the region.

"Up until now, Gulf developers in North Africa have been focused on planning and approval. Now they are looking at building the infrastructure and their plans have become less aggressive," he says.

"There will also be a slowing down in the proposed rate of development. Although investor sentiment in the Middle East is still relatively strong no one will be immune from what is happening globally."

Emaar admits its projects in Morocco hinge on tourism, so how much demand is there out there for holiday homes in the North African country?

UK estate agent Winkworth International is selling off- plan apartments and villas at a number of holiday hotspots in Morocco like the Mediterranea Saidia coastal development on the north coast and the Riad Villas project on the outskirts of Marrakech. Prices range from $120,000 for apartments to $1.17m for the villas. Sales are way down, though.

Giles Wickham, a negotiator for Winkworth in London says: "Morocco is very dead. There is no buyer interest. Things are plodding along and we are just hoping for the market to pick up again."

Emaar, the largest publicly-traded developer in the Middle East, has a vast presence in North Africa. It is planning two huge developments in Cairo, aimed at the burgeoning middle class population, made up of a mix of residential, leisure and retail space.

The $1bn Uptown Cairo project, due for completion in 2013, will be built in the Muqattam Hills, close to the city centre. New Cairo City, a residential development to the east of the capital, will also cost $1bn.

Despite roaring inflation, Egypt's economy is growing at around 7 percent and disposable incomes are rising. Low land costs and rapid urbanisation combined with a more favourable mortgage market has created a strong market for residential and commercial bricks and mortar.

Increased economic prosperity across North Africa is true for the whole region. Tunisia is seeking investments of $50bn to $60bn from Gulf investors- three times its annual gross domestic product of $20bn.

In April 2006, Emaar announced plans to develop the $1.88bn Marina Al Qussor project on Tunisia's east coast. The 442-hectare marina development will offer a mix of residential properties such as villas, townhouses and apartments, set among beach and sports clubs. Other developers active in Tunisia include Bahrain's Gulf Finance House, which is building the $3bn Tunis Financial Harbour in Tunisia.

Some experts, however, are concerned that Tunisia will not be able to absorb this money into its small economy, with inflation at a three year high and a liquidity surplus in the market.

But those putting the money into these mega North African projects are naturally more optimistic. Privately owned Abu Dhabi Investment House (ADIH) will unveil new developments in North Africa next year. Its $7bn ‘Style Cities' project spanning the Middle East and India will also reach deep into North Africa.

Its Style City development in Morocco - comprising of shops, museums and exhibition centres focused on fashion and jewellery - is costing $1.5bn alone. ADIH is close to raising the $230m of equity to help finance the project. The remaining $1.3bn will be paid for through pre-sales and debt, which has already been secured.

Fawaz Ali Al Jowder, the group's new deputy chief executive is upbeat about the outlook for investment in the region.

"There are a lot of supporting sectors of the economy in North Africa that will make it shine.

"Not just property, but oil, gas and petrochemicals are taking off. The governments are opening up as well, politically it's getting better," he says.

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