Survey: Major demand for affordable housing for Palestinians
Wednesday, Dec 10, 2014 in Office of the Quartet Representative
There is considerable demand for affordable housing in the Palestinian territories, where some 70 percent of Palestinian households currently cannot afford average house prices. Palestinians looking for a new home want smaller houses than previously thought, and are willing to put up to 40 percent of their income towards housing costs. A detailed, effective demand survey commissioned by the Office of the Quartet Representative and the World Bank found that the average desired home is 106 square meters for affordable housing, smaller than the 120-150 square metres that has been the working norm up until now, with many households accepting even smaller units. By building such smaller units, developers could cut housing prices significantly and reach new market segments.
In addition, the survey found that 50 percent of respondents are capable of putting together a down payment above $7,000, and the average cost of a desired home is around $52,000. The results point to significant opportunities for developers building homes at affordable prices for the Palestinian market.
The survey was presented at a workshop in Ramallah on Wednesday (10 December, 2014) hosted by the World Bank, UN-Habitat, the Ministry of Public Works and Housing, and the Office of the Quartet Representative. Dozens of representatives from real estate developers, banks, development agencies, and local municipalities attended the event. The objective of the survey was to contribute to the development of affordable housing as part of the OQR’s Initiative for the Palestinian Economy (IPE) and the World Bank’s long-standing commitment to affordable housing.
A total of 631 households in the West Bank who are considering building or buying a new dwelling were surveyed for the study in March-April 2014. The monthly income of the respondents ranged between NIS 1,500 and 5,500 NIS per month (approx $425 – $1570). Relatively few (16%) of the respondent families are renting.
Addressing the forum, the OQR’s Economic Development Advisor Johan Berggren said, “The results of the survey illustrate the huge demand for affordable housing among Palestinians. Up until now, housing construction has not been targeted at low to middle income Palestinians – and some 70 percent of households cannot afford average house prices in sampled markets.
“For the first time, this survey captures the intersection of affordability and housing demand for Palestinians in the West Bank. While it shows us the importance that Palestinians attach to housing, and the lengths they are prepared to go to achieve their dreams, it also highlights that the normal requirement by banks for a 15-20% down payment is a major hurdle for many families. Expanding construction in housing is a central part of the Initiative for the Palestinian Economy, as we aim to better meet the huge demand for affordable housing. The market is currently characterized by oversupply at the high end and undersupply at the low end – and so large-scale affordable housing schemes are needed to unlock housing demand.”
Nick Gardner, Construction and Building Materials Advisor, said that “the research found that Palestinians do not perceive homes as a commodity which can be bought and sold: a new home is a once in a lifetime investment. There is no culture of ‘moving up’ the housing ladder over time, as there is in Europe, for example. So owning multiple homes over a lifetime would actually be a major cultural shift for Palestinians, and one which should contribute to lower costs for first-time home-buyers.”
An “effective housing demand survey” differs from regular surveys in that it provides respondents the information to make an informed choice regarding their solutions based on actual costs, and is therefore the product of a dialogue between the respondent and the interviewer regarding the options.
Many respondents chose basic finishes and simpler kitchens to reduce the costs of their homes. Wednesday’s workshop also included a focused discussion aimed at learning more from developers and banks about the issues they encounter along the housing development value chain. Participants discussed challenges in permitting and registration of land, and construction and building costs. Participants also discussed the recommendations of the report, which included amending rental regulations to increase the supply of rental housing, while mortgages or rent-to-buy schemes must be designed to accommodate down payments closer to 15%.
OQR is working with partners to discuss implementation of the findings, including a potential pilot affordable housing project that could serve as a model for further development.
§ View the OQR presentation to the workshop
§ To read the full results of the effective demand survey
§ For more information on the IPE