2023-11-10 09:08:15
The Savings Fair was an opportunity for the public to discuss with Ahmed Rochd, Head of Equity Research at Valoris Securities, the real estate sector in the light of new housing assistance. It must be said that the sector has experienced a decade of decline in construction starts. “Currently, the construction sector is at its lowest level, with annual production of 200,000 units, lower even than the rate of production which preceded the first generation of aid aimed at social housing. At the same time, the housing deficit, which has been declining steadily for 10 years, experienced a rebound in 2022, reflecting the arrival on the market of new demand, while supply is at its lowest. For the analyst, this configuration is ideal for starting a new cycle.
Promoters pushed to clean up
The bearish phase of this important economic sector was accompanied by a tightening of financial conditions, with banks having decided to cut back on financing. Restrictions which exposed the difficulties of certain promoters, who had to make an effort on their financial structure to continue to survive. For Ahmed Rochd, this situation could have been worse if the banks had not continued to finance buyers with increasingly advantageous conditions. This is evidenced by the drop in lending rates of more than 180 basis points over the period. All of this has therefore pushed promoters, especially those listed, to reinvent themselves and improve their financial structures. Thus, the debt ratio (Gearing) of the sector decreased from 120% in 2013 to 44% in 2022. Simultaneously, the cumulative size of the balance sheet of the three listed real estate companies contracted by 36% over the last nine years . This decrease is a direct result of the reduction in activities in the sector, symbolized by the slowdown in construction starts. Currently, the assets available to real estate companies no longer generate the same turnover as in 2013. In fact, the return on assets in the sector stands at 8.6% (compared to 23% in 2013), while that the return on assets is limited to 0.4% in 2022 (compared to 4% in 2013). For Ahmed Rochd, this is the main challenge for real estate developers: increasing their capacity to generate more turnover with fewer assets.
Now, with a healthier structure, achieving better profitability is within reach. Indeed, the introduction of a new aid program, planned to extend over the period 2024-2028, is considered a major catalyst for the real estate sector. This initiative is a continuation of previous policies dedicated to the sector, and is distinguished by a more flexible approach in terms of housing surface area, without imposing a minimum quota of units to be produced for real estate developers. Unlike previous social housing programs, this new project targets exclusively the buyer, no longer offering tax advantages to developers. This formula differs from the previous model which, between 2010 and 2020, was exclusively intended for low-income households. In contrast, this recent approach aims to provide financial support to middle-class buyers, marking a major turning point in the real estate sector. Because, for the first time in history, the middle class is being targeted. In such a case, this can only be positive.
Listed real estate: A trendy sector
Real estate is the star sector of this year 2023 on the stock market. The sector index has gained 116% since January 1, and companies in the sector are gradually returning to the papers of financial analysts, who have for a long time, and rightly, avoided covering the sector. Investors will now keep an eye on the amendments to the 2024 Finance Bill, hoping to see the introduction of a change concerning residential permits taken into account in the aid. It is hoped for more flexibility, at least on properties whose value is greater than 300,000 DH, so as not to condemn the developers’ previous stocks. To be continued !
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