Yemen’s housing industry [Archives:2006/975/Business & Economy]

August 24 2006

By: Raidan Al-Saqqaf
With huge migrations from rural to urban in Yemen, the demand for real estate is expanding rapidly and urban centers of the country witness tremendous growth as cities expand to host many new residents and expanding population. This reports aims at studying the trends in the Yemeni housing industry and the effects of its growth on real estate costs, land prices, constructions, infrastructure services, as well as investments and government policies in this regards.

The global trend of migration from rural to urban follows a number of complicated changes in economic activity, until four centuries ago the source of wealth was in land and through agricultural activity, thereafter the industrial revolution sparked considerable changes in wealth generation economics as activates in Iron and steel as well as manufacturing provided new means of wealth creation, creating with that hubs of industry jobs and income sources for many workers. This trend continued to develop in most of Western Europe and North America, followed by parts of Asia in the twentieth century, and now Yemen is catching up with the trend.

Forty Years ago, the main means of income generation was dominated by agriculture, with small numbers of people working in trade and services. However, with the emergence of new sources of income but those were limited to urban hubs which are the major cities in Yemen, such as Taiz, Aden and Sana'a, which attracted job seekers to work in various factories and in various services including the government. However, this issue wasn't planned for enough ahead of time, with that attraction came a fundamental problem, i.e. growth in the urban housing industry should at least accompany the growth of migration and population in urban centers.

The poor planning in Yemen's housing Industry results from lack of understanding of the size of the issue, as well as the poor coordination between the privet role and the public role in housing and land market, and also in regulating the relationship between market players and owners of estate and those who wish to enter the market. This has resulted in making the housing problem a problem of affordability as a result of inadequate availability, making the cost of housing increase on timely bases due to the increased demand unmet by existing supply. Resulting in demand-motivated supply to exist through the purchase of new land and constructing new housing facilities.

Construction in itself will have a boom in turn, with the demand for civil engineers, construction workers and raw materials for construction increasing, prices of such materials – in the view of the limited supply – will accordingly increase, therefore increasing the size of the problem.

Another relevant issue is that construction works are rarely located at the areas that are most needed, as the center and more populous areas of Yemeni urban centers are in most cases misused by small and inefficient buildings of a few stories that can host a small number of residents with limited expansion space and capital to fund more efficient utilization of space.

Infrastructure is yet another obstacle to proper housing, as electricity networks and phone line services continue to expand, more fundamental infrastructure services such as sewage and proper roads are in short supply, seemingly the budgets allocated for infrastructure development are not enough to cope up with the increased demand.

The Urbanization trend is not slowing down to cope up with the challenges of the housing industry in urban centers; in fact it is accelerating and making those challenges even more complicated. What is needed are government policies in order to regulate the growth of the industry and also creating new housing projects to meet some of the demand. Regulation to ease financing of housing projects on the part of investors as well as to facilitate the purchase of houses for citizens.