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Euromonitor International has identified the top three markets globally in 2017 by fastest growth in mortgaged households. They are Egypt, Algeria and Nigeria. Emerging markets dominate the rankings of the fastest growing mortgage markets, with the top 19 growth countries all developing economies. In particular, the Africa and Middle East regions are home finance hotspots, as their large and growing populations are in urgent need of new infrastructure and residential units to resolve urban housing shortages. Mortgages are an important tool for developing mature consumer markets, since they allow consumers to become homeowners, which can provide more economic stability and improved consumer credit worthiness (though at the cost of long-term indebtedness). This article is part of a series that will highlight key trends from Euromonitor’s Emerging Households strategy briefing.
Driven by huge domestic demand, Egypt will be the standout market for mortgages this year globally. The country will see an annual expansion of 18.9% in mortgaged households in 2017. Egypt is facing a long-term housing crisis, with a huge shortage of affordable homes for the large segment of the country’s low- and middle income classes. A small (and declining) number of mortgage lenders, an unpredictable economy, and weak regulatory policies have combined to constrain the mortgage market. As a result, there is a surge in the construction of illegal residential units, up to 500,000 a year according to Egypt’s Ministry of Housing. People are building illegally first and seeking legal approval later.
The government has tried to combat this illegal land grab by launching several measures aimed at improving home finance access to the population. In 2014, the country’s central bank allocated around US$570 million to finance low-income housing projects, while the state-run Mortgage Finance Fund recently received funding of US$125 million from the World Bank, part of a US$500 million aid package. Nonetheless, as of 2017 less than 300,000 households will be owned through a mortgage, a similar total to neighboring Algeria and Morocco despite Egypt’s much larger population. As Euromonitor’s global mortgaged households map below demonstrates, Egypt still has an early-stage mortgage market.
African and Arab countries will witness the world’s strongest rates of mortgage growth this year – a culmination of rapidly growing populations, low incomes and an inadequate supply of housing. Algeria is a good example of all three factors. The country will see an annual expansion of 16.3% in mortgaged households in 2017, the world’s second fastest increase. The Algerian government has pledged major sums to improving the country’s housing situation, which suffers from similar characteristics found in Egypt and the wider North African landscape, namely a large proportion of unemployed youth, a large inflow of rural inhabitants into cities (due to a collapsing tourism sector), and a long-established tradition of illegal housing development. In addition, Algeria’s real estate prices are among the highest in North Africa, and they are going up, according to Euromonitor’s Index of Housing Prices. This creates major affordability obstacles for wannabee homeowners. Opportunities for regulated and fair lenders are sizable considering the huge demand locally.
Nigeria has one of the largest mortgage markets in Africa, with the government viewing real estate as a pathway to stimulating the economy and creating a more mature consumer market. The country will see an annual expansion of 14.6% in mortgaged households in 2017, the third largest increase worldwide. Several measures are being rolled out to improve local home financing conditions. The Nigeria Mortgage Refinance Company, regulated by the central bank and the country’s largest mortgage lender, launched a regulatory system for running the mortgage sector named the Mortgage Market System in February 2017, which is expected to enhance efficiency and costs within the mortgage ecosystem. The Nigerian Ministry of Finance in 2016 also promised to support the construction of over 300,000 affordable homes through mortgage financing, as well as the creation of 700,000 new jobs in the housing development cycle. In March 2017, the Nigerian government also approved a 10% waiver on housing mortgages below US$15,900, as it looks to keep mortgage rates in the single-digit range. These efforts will be necessary to expand the still-underdeveloped mortgage market.