Morocco - is this the new economy on the block?

After the turbulence of the last few years in the global property markets, potential investors could be forgiven for asking themselves whether any rising stars still exist. Fortunately the answer is yes, and one of them is closer to home than you might think. With its strong economic fundamentals and close links with Europe, Morocco offers an impressive track record and a promising outlook, whether you’re looking to make your first investment in property or to add to an established portfolio. 

Morocco met the global financial crisis in a strong position, thanks to a decade of macroeconomic and structural reforms. The IMF describes the Moroccan financial system as ‘sound’, and its limited exposure to international capital markets proved to be a benefit. The Moroccan authorities responded to the crisis quickly and skilfully, minimising its impact and maintaining confidence and domestic demand. As a result, while other countries are still searching for the green shoots of recovery, the latest report from the Moroccan central bank, Bank Al Maghrib, suggests that its economy will grow by 3-4% in 2010, following on from 5% growth in 2009. It’s a reassuring scenario for investors, and it’s supported by the government’s plans for the future.

Government and the economy

The Moroccan government has been extremely active in recent years in diversifying and strengthening the country’s traditionally agricultural economy. Developments in industry, commerce, tourism and infrastructure have strengthened the country’s position, and its positive economic indicators back this up: a budget surplus, low inflation and low public debt in 2009 are all evidence of an economy that is well-managed, stable and resilient. Further plans this year are designed to stimulate the economy further, including a cut in income tax, an increase in public sector salaries and more investment in roads, ports and railways. As demand for property and development land accelerates, Morocco offers overseas property investors attractive opportunities in the tourism and domestic property markets, with the potential for both excellent yields and sustained capital growth.

Vision 2010 and country infrastructure

The Vision 2010 plan was launched by the King in 2001, aimed at increasing tourist numbers to 10 million by this year. Although the global crisis means this is unlikely to be achieved on time, the plan is already delivering benefits in terms of infrastructure, investment, employment and education. A key part of the scheme is Plan Azur, a development of six purpose built coastal resorts and leisure facilities including golf courses and marinas. New roads and motorways and an expansion of major airports will improve access for visitors, and marketing will target tourists from non-traditional areas such as the Gulf states and Russia. Many properties are available off-plan, while prices for completed properties in Morocco have risen by 40-50% over the last two of years, and even increased in 2009. Short term tourist rentals still offer the best yields - a professionally managed property in a good location can provide as much as 12% per annum - but even long term rentals can offer yields of 5-10%.

Moroccan people have traditionally taken a very cautious approach to borrowing, but there is evidence that this attitude is changing. The huge domestic demand for housing has seen more people opt for mortgages to fund their first property purchase: the value of outstanding loans rose by 23% in 2008, although this slowed the following year. Once again the government has been active, aiming to meet local needs by constructing 100,000 affordable properties a year. Many of these will be located in 15 completely new cities close to the centres of highest demand: Marrakech, Rabat, Casablanca, Tangier and Agadir. With mortgages now also available to foreign buyers, mortgage lending both to overseas investors and to local purchasers is fuelling demand and promoting buoyancy in the Moroccan property market.

Part of the EU?

The Moroccan government has long recognised the benefits of welcoming foreign visitors and investors, and has sought to strengthen links with both the European Union and United States. These in their turn have valued the co-operation of such an open and forward-looking partner in the fight against terrorism and illegal migration. The EU has given Morocco advanced status, above other members of its ‘neighbourhood policy’, while the US describes the kingdom as ‘one of its oldest and closest allies in the region’. Trade benefits have followed, such as a deal between Morocco and Poland to act as a platform for each other’s exports. Both the EU and US, however, have appealed to Morocco to resolve the status of Western Sahara, which remains in dispute. Morocco has proposed an autonomy plan for Western Sahara, but this falls short of full independence; the debate continues.

For overseas property investors, Morocco has many attractions: a stable and dynamic government, a strong economy, a buoyant property market with many investment options, an inviting culture, potential for income and capital growth, developing infrastructure, privileged status as an ally of the EU and US. It has performed robustly throughout the global crisis and as a result, compares very favourably with some more traditional foreign property markets. Is Morocco the new economy on the block? Surely, the answer has to be yes.

^{Louise Reynolds}

^{Posted 7th April '10} 

Property Venture^® is an independent, UK-based agent. We help time-strapped investors and holiday home purchasers, buy abroad by guiding through the buying process, so reducing the hassle. We visit the countries you buy in, so we can offer common-sense, grounded advice. Overseas members of NAEA. This means we have been subjected to the membership criteria and have signed up to follow the professional Code of Conduct established to help you, the potential buyer or investor, buy property with confidence