Despite growing population, rise in construction costs leaves 20% of housing supply vacant

(Photo: Shutterstock)
(Photo: Shutterstock)
AMMAN — By 2030, Jordan is expected to host around 1.7 and 3.5 million new residents, on top of its over 10 million population. Nevertheless, more than 20 percent of the existing housing supply is vacant, according to the World Bank.اضافة اعلان

Construction costs in Jordan, including labor and materials, account for 20 to 40 percent of the cost of a housing unit, while taxes and fees on housing projects can “reach up to 30 percent of the total cost of the project,” the World Bank said in a report published in 2018.

“The housing sector in Jordan is heavily taxed,” the report noted.

The same report dissecting Jordan’s housing sector, said the “unexpected and rapid population growth has put incremental pressure on the housing sector.” Over the past 15 years, Jordan saw an influx of refugees and migrant workers. As a result, its population grew by an average of 6 percent annually, “exceeding population projections by almost 30 percent.”

To maximize tax revenue, the Jordanian government taxes shipping costs, in addition to taxes imposed on imported material. In an interview with Jordan News, the head of Jordan’s Housing Investors Association, Kamal Awamleh, agreed that soaring shipping costs have proven detrimental to the real estate market, as materials have become more expensive.

Awamleh also accredited rising construction costs to the lack of “market oversight” — a task that the Ministry of Industry Trade and Supply is responsible for.

The rise in construction costs is further exacerbated by the market’s inability to compete, according to Awamleh.

Low competition, in any market, is bound to keep prices high. Cement, for instance, in light of the absence of competition, is up by more than JD10, he explained.

This vastly impacts the cost of constructing a residential building in Amman, which requires 500 tons of cement on average. As cement prices shot up, the construction of a single building now costs JD7,500 to JD10,000 more than it did in 2020, according to the sector representative.

Competition is especially low “among steel and cement factories,” Awamleh noted.

The Competition Directorate at the Ministry of Industry Trade and Supply is falling short in maintaining healthy competition, according to Awamleh. The lack of competition, often supplemented by merchants’ attempts at maximizing profits, directly contributes to the housing crisis that, as of now, looms in the distance, says Awamleh.

Jordan only has a few governmental programs that “support either the development of affordable units or to provide subsidies to the poor households in need of housing,” according to the World Bank.

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