Who can afford a house?

The last couple of years have seen astronomical rises the prices of real estate in Amman and major cities in Jordan. While the reason for this rise is not clear, it's effects on young families looks to be profound.

Moderately priced apartments are difficult to find, with most easily falling into the 70000 JD range in Amman (Examples here) and 50000 JD in Irbid and Zarqa. Of course, within Amman, the idea of a small house is out of the question for most people. The department of statistics says that more then 70% of housing units in Amman are apartments, with more single housing units in other areas.

Now, the question that is being asked is how can people afford these prices, given that the average income of a Jordanian family is less than 6000 JD's a year, with average food expenditures of 2200 JD's, 1600 JD for housing and 800 JD for transportation. Essentially, it would be impossible to live a standard life with this level of income and to save a substantial amount of money. Payments for a bank loan for the total amount (assuming that it is possible to get one) would be more than the total income of the average Jordanian.

The number of new families established in Jordan in 2004 was about 54000 families, requiring that number of new homes. The government builds about 6000 units pr year for low income families at affordable prices. This hardly creates a dent in the demand. Moreover, rents are rising as well, with most Jordanians preferring to own their own home.

Most investors in the housing field blame rising costs for land. This rise in costs has led to the sprawl of the city towards the west, north and south, where prices were previously lower. It looks like further outward expansion would be difficult, and would stretch the transportation, water, sanitation and energy infrastructure even further. An obvious approach is to concentrate on areas outside Amman. Madinat Al Sharq is an ambitious project to develop a model city east of Zarqa. The project is envisioned to house about 500 000 people by 2025. However, as the web site describes the project, it is aimed towards "middle and upper income housing". Presumably, prices will be lower than in Amman, although enticing people to move to Zarqa will probably be challenging. It seems to me that the only reasonable approach towards the dilemma we are facing is to encourage growth outside of Amman. While this will be difficult, it is a national challenge. To make it work, we will need to invest heavily in modern public transportation systems. The current state of affairs will not be conducive if transportation ends up eating up significant parts of people's income.

As for young families, it looks like their options will stay limited. These will include smaller apartments, in more remote and less desirable areas. If the transportation system stays the way it is, even this will not be an option.