Buying Property in Morocco - Economic Factors

Morocco’s economy is growing rapidly due largely to foreign investments. Morocco can produce many labour intensive products far cheaper than any other country close to Western Europe.

The major problems that all developing countries face are being felt in Morocco. The country has a free market economy that has grown by an average of 4% a year since 1983.

The government has adopted a proactive privatisation policy that is creating opportunities in the telecommunication, utilities and automotive sectors. There is a free trade zone at the port and airport of Tangier and merchandise entering these zones is exempt from customs, fiscal and exchange control.

Morocco Economy

Morocco can be described as a stable economy enjoying steady growth. The Jettou government continues to encourage reform, liberalization, and modernisation to stimulate growth and employment.

The Dirham, Morocco´s unit of currency, has experienced growth of 18% since 1990. The economy is expected to be boosted further if, as is expected, Morocco becomes part of the Euro-Med free trade zone. As an important element of the national development plan of Vision 2010, the chief economic objective is to establish a close relationship with the European Union.

With the aid of the International Monetary Fund (IMF) and an economic reform programme, Morocco has managed to restrict government spending. Today, employment remains mainly within the volatile agricultural sector, but over the long term Morocco will have to move its economy away from agriculture and develop a more stable economic basis for its growth. One area is in the growing tourism market, where significant amounts of employment are being created in the construction and service sectors which will later be transferred to the tourism sector.

Morocco has held inflation rates to industrial country averages over the past decade due to a foreign exchange rate anchor and well-managed monetary policy. Inflation in 2005 was at 2.5%. The country maintains a current account surplus and foreign exchange reserves are strong, amounting to around $15 billion.

In 2005 the Moroccan Government secured a Free Trade Agreement (FTA) with the USA. The U.S.- Morocco FTA is the second in the Arab world and the first to be made in Africa. It immediately eliminated tariffs on 95% of US trade in consumer and industrial products. Further FTA reforms and liberalization are currently underway.

Summary of economic factors influencing investment in property in Morocco

1. Moroccan Property prices 50% less than other European resorts
2. Low cost of living - experience a luxury lifestyle for modest expense
3. Booming property market
4. Between 0% and 20% tax on any capital gains
5. 0% Inheritance Tax to family
6. No annual property tax for first 5 years
7. Rental occupancy reaching 85% most years during the Peak Season
8. 70% mortgages available
9. Vision 2010 will improve infrastructure and accessibility, which will impact on property values
10. Increased tourism generated by the Vision 2010 project will create huge requirement for rental accommodation
11. Capital growth around 15%-30% based on last year’s figures (Homes Overseas Magazine, 2005)
12. Lower airfares (due to the Open Skies policy) will make Morocco easier to get to and therefore more desirable as a tourist destination.
13. Yacht club and berth fees for under £27 per month

Moroccan Property prices 50% less than other European resorts

Morocco is classed as an emerging property market, and we are currently at an early stage of the property market’s growth.

This is a perfect time for investment as property prices are at a low and look set to rise as the Moroccan property market and supporting infrastructure matures.

Low cost of living - experience a luxury lifestyle at little expense

The cost of living in Morocco is much cheaper than in most European destinations. In a list of global cost of living rankings compiled by Finfacts (2005 / 2006) the only entry for Morocco was Casablanca at number 59. London is at number 3. A beer I Morocco costs around €0.80.

Booming property market

At this time the property market in Morocco is booming. It is a huge time of growth for Morocco especially in those parts earmarked to be included in the national development plan. These areas are being transformed into luxury resorts with supporting infrastructure for the tourism industry.

This and many other factors create a huge demand for accommodation and property investors are happy to move in early, purchase property at excellent value for money and look to generate rental yields whilst waiting for the market to build and force property prices upwards.

Between 0% and 20% tax on any capital gains

morocco appeals to investors due to, among many other factors, its favourable tax legislation. Capital gains is charged on property at the rate of 20% if sold within 5 years, 10% if sold within 10 years and 0% if sold after 10 years.

0% Inheritance Tax to family

Property investments are seen as a safety net often for the children or relatives of the investor. In Morocco there is zero inheritance tax if family inherits it.

This is another reason that favours a Moroccan property investment over many other property markets as heavy taxes can apply to the beneficiary of inherited property in many alternative property markets.

For more detailed information on taxes visit our Morocco property tax section.

No annual property tax for first 5 years

Morocco has positioned itself favourably to encourage international investment and has a policy of zero property tax charges for the first 5 years. There is also a tax free period on service charge payments.

Rental occupancy reaches 85% most years during the Peak Season

Unlike many other emerging property markets where an investor makes his investment as early as possible then sits back and waits for a period of time for the area to attract tenants and start to generate rental yields,

Morocco has a solid tourism base and can boast 85% rental occupancy in most cases over the high season. It is entirely possible to cover mortgage payments and bills for the year through rental gains achieved in the high season (June - September).

A €100,000 2 bed apartment could be expected to generate a monthly rental yield of €2,000 for the 4 high season months.

70% mortgages available

Many emerging markets offer much less flexibility than the more established markets when it comes to finance options.

Investors can be required to finance their investments in stage payments or even in much larger lump sums as lenders usually see the investment as high risk initially and then begin to offer improved finance options as development of the market continues and risk is reduced.

It is possible in Morocco to borrow up to 80% of the value of the property over 15 years at reasonable interest rate (currently around 5.5% Feb 06).

Vision 2010 Project to increase tourism backed by King Mohammed and the UAE.

King Mohammed VI and the UAE have created a huge project to invest massive funds into Morocco, which are aimed at increasing tourism.

These funds are to be spent on improving the infrastructure including roads, trains, marinas, ports, shopping malls, beach clubs etc.

The overall goal of the Vision 2010 project is to drastically increase visitor numbers to an amount of 10 million per year.

Increased tourism will create huge requirement for rental accommodation

The huge increase in tourism that is currently underway and set to continue to grow due to the Vision 2010 development project requires vast volumes of residential accommodation.

The Moroccan government is encouraging luxury developments in the major resort areas which international property investors will seek to purchase at rock bottom prices and then use their investment to supply the ever growing demand for accommodation and so generate solid rental yields for the investor.

Capital growth 15% - 30% based on last year’s figures (Homes Overseas Magazine)

The huge development is also expected to help drive property values higher as major infrastructure and resorts complete.

Many articles have been written speculating about the potential capital growth gains in Morocco - with some quoting as much as 30%.

However growth at a more conservative estimate of between 15% and 30% is a more realistic looking figure.

Open Skies policy activated on 1st Jan 2006 will increase competition for low cost airlines to service Morocco.

The "Open Skies" policy is a clear sign of the dedication Morocco has to increasing visitor numbers. By allowing an open skies policy it’s a direct invitation to airlines to service major resort areas in Morocco.

The competition for passengers creates a natural price watchdog ensuring fares are kept competitive. This is all welcome news to the property investor in Morocco as property with easy communications is much sought after by holiday home buyers. The largest demand for rental accommodation is also normally within a short distance from a major airport.

Yacht club and berth fees for under £27/month

Morocco and its property resort developments are very much geared at the luxury end of the market. Morocco is already attracting film stars and the world’s wealthy are purchasing property on many of the new resorts. Morocco is positioning itself as a new Puerto Banus or St Tropez. Morocco has one major advantage over these existing hot spots - prices remain very reasonable and a fraction of the cost of other destinations.

Useful Links:

Economy of Morocco - Wikipedia, the free encyclopedia.

Oxford Business Group - Country Report Morocco.

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