More to do than just lying on the beach
The house I bought in Morocco. Lovely, eh ;-)
Buying a Property in Morocco
by JL Farmer
The Moroccan government and the Moroccan people in general are very accepting of European expatriate folks and do their best to make us feel welcome in visiting, and living, in Morocco.
European expatriates tend to have a universal penchant for falling in love with a place and then wanting to quickly buy a property in that location. Morocco is no different, in this respect, although it does have the added ingredients of proximity to Europe, hot weather for a lot of the year (especially in Agadir and the south) as well as being somewhat oriental in nature, yet being a modern, unweird, country at the same time. A very appealing country to live. Morocco...
If asked for an opinion on the subject, I always advise people to rent an unfurnished property in preference to buying. Maybe a good idea to rent a furnished property at first for six months or a year to be sure of adapting to living in Morocco. Many people settle well, learn the ropes and like living here.
My main reason for writing this article is to inform people of potential problems that can exist when buying a property in Morocco. I have quite a lot of friends here who have been stung by some of these problems and it has cost them a lot, both financially and emotionally. No one ever goes seeking problems but if they potentially and commonly exist, are time consuming and expensive to resolve (or fail to resolve at all) then I believe that it's worth knowing about them in advance, if only in order to avoid them at a future date when they may decide to raise their ugly heads in a situation that we happen to have entered into.
Bearing in Mind the Economy of Morocco
Many employed Moroccan people just about earn 3000 dirhams a month, never mind pay that amount, or more, in rent. It is not uncommon to find a single wage earner in a family who supports maybe five or six (or more) family members. They regard their wages as family property and see their duty to financially support their loved ones. Old peoples' homes are virtually unheard of in Morocco, which is very commendable in that Moroccan families look after their elderly relatives in their own home. There is no unemployment benefit and state pensions are only paid to people who have been in professional employment for at least forty years. My Moroccan neighbour who lives across the street from me pays 600 dirhams a month for a large, old-fashioned (yet interesting) dwelling.
The three course meals for 45 dirhams in Talborjt restaurants are very telling on the real economy of Morocco. In most cities in northern Europe, four Euros will not even buy a cup of coffee. And as for rents, even at around 3000 dirhams a month, which many Moroccan people cannot afford to pay, rents on apartments are still only around 20-30% of the outrageous rental prices that many people are paying for apartments in cities in northern Europe, albeit that the salary differential between Morocco and northern Europe is vastly different due to low Morocco GDP vis-a-vis the Moroccan Minimum Wage and EU minimum wage legislation enacted under the Maastricht Treaty the rates of which are established by member states' national governments.
Moroccan families often buy property solely as an investment, knowing that the property's value will increase over time. I personally know several affluent Moroccan families that own 20+ properties, (in both Agadir and Tangier.) Given that non-paying tenants of unfurnished property can legally live in the property as such for up to four of five years without paying the rent until the local Tribunal adjudicates differently, (like what happened with my Moroccan next door neighbours in Tangier) many property owners are reluctant to take the risk of renting out nice property to unreferenced people.
Article: "Over 1 Million Moroccan Homes Are Vacant, Mostly in Cities: HCP"
But property owners love to rent to an expatriate married couple, for sure. They know that the rent is always the first thing that is paid every month, without fail and that the tenant/s will generally, eventually, improve an unfurnished property to their own liking (new windows, bathroom, kitchen, plumbing, fixtures etc) as they often don't plan on moving anywhere else during their lifetime and that they won't give the owner any headaches or sleepless nights.
Tip: If you find a nice rental property that you really like and move in there, don't ever allow the newness to wear off. Appreciate your new home in Morocco every day of your life. Yes, us folks who hail from Europe and beyond are accustomed to a more fluid way of renting property but be sure to remember this: it is very easy to find yourself in a regrettable situation when it comes to changing your rental property and tales of woe are rife in the expatriate community (we hear of them often.) Think really hard before you give up the place where you live - it's so very easy to sooner or later find yourself worse off elsewhere, even if the downside to a situation is not immediately obvious - all kinds of stuff can happen that you may not be aware of before you move home.
Obtaining a Resident's Card BEFORE buying a property
Yes, there's usually a gotcha and this is a biggie. We know a couple who bought an apartment near the souk in Agadir and started paying their annual local property tax. When they registered for the tax, they had to register as tourists as they did not have residents' cards. They soon found out that property owners who are officially classed as tourists, as opposed to residents, pay around more than double than residents for their annual property tax.... and... the classification cannot be changed later on. Our friends are still paying the tourist property tax rate and, unless the rules are changed, will always be paying the extra money in property tax. So... best to remember to get a resident's card before buying a property.
Tax Liability on Sale of Property in Morocco
This is where it all begins... As a buyer, you have no tax liability - but that situation would soon change if you sell a property at a profit at a future date. If the full price paid for the property was not written on the legal paperwork when you bought it (e.g. because you paid part of the purchase price clandestinely by overseas bank transfer, or off the record in cash) then you will find that you will come under financial pressure to break the law again (yes, again) when you try to sell the property by also accepting a clandestine overseas bank transfer or part cash payment - otherwise, if you put your hand up by declaring the full sales price on the sales documents you will find yourself being liable for paying the back-tax debt of previous sellers who were dishonest - and if you officially understate the sale price and are apprehended then you will be prosecuted and face possible confiscation of your property and receive a prison sentence.
Best to refuse to buy any property where the seller demands any part of the amount of the purchase payment off the record. To initiate or comply with such a demand is a criminal offence in Morocco and can have serious consequences. Never mind if a property agent (in Morocco, Dublin, London etc) tells you that it is standard procedure or that everyone does it - the point is, that if you do it and get caught, you'll be in big trouble. Best to insist from the very beginning when making a first purchase as a buyer that everything paid be written down officially. Likewise if and when selling a property. Everything written on the record. Living honestly with a clear conscience and sleeping easy at night.
Having said all of the above, following the government's 2012 anti-corruption campaign initiative, there are now more property developers of new apartment complexes who are promoting their sales by guaranteeing completely legal, "on the record" sales, and this is much to be commended.
The Property with a Sea (or Mountain) View
I personally know at least five people - in Tangier and Agadir - who have bought property with a view and lost their sea (or mountain) view within a short period of time after their purchase. I know of several main street apartment blocks where all owners on the upper floors have lost their view due to later building construction.
Property developers sometimes sell apartments with a sea or mountain view at a premium price, then when the block is all sold out they begin to build directly in front of the block and do the same all over again with their next "sea view" sales pitch - when all the time planning permission has already been given to the property developer for the new-builds and the public has not been made aware of it.
In Morocco, local residents are not informed of projected building plans in their vicinity. There are no residents meetings, no possibility of objections or anything else - because of the simple fact that local residents and the general public are not informed about any proposed building plans as the plans are not made available for public scrutiny. And why not? Basically, because it is held opinion that the general public and local residents are not conducting business in a future building plan and that the business plan is only between the planning office and the developer and therefore of a private nature.
This practice is downright dishonest on the part of the seller - whoever they may be - to say the least, and is nothing more than taking advantage of the buying public in the absence of local public scrutiny laws that do not allow the public to know that there are plans in the works for a building project that will remove the panoramic view from their property - a property that was sold at a premium price for aforesaid panoramic view - only for it to be lost later on when the new block is built that blocks that view. I am mentioning this foul practice in this article so that people will be aware of it.
There are only two real guarantees that losing your sea or mountain view will not happen to you:
1. if you buy an apartment in a block be sure that it has no vacant land in front of the windows that offer the sea view (or mountain view, as the case may be.)
2. don't buy any property at all. Maybe rent an unfurnished property on a three year (automatically renewable) contract where you can live securely for the rest of your life without:
a) any hassle over possible loss of panoramic view
b) having to fork out large capital amounts to purchase a property
c) having to worry if you will get your money back in the event that you might want to sell the property later on
It's a no-brainer. The above second guarantee gives three good reasons to rent unfurnished property long term as opposed to buying.
New-Build HomesProperty agents always "talk up" the property market by mentioning a projected annual yield. I know people who believed the sales pitch, bought a property and were some time later unable to sell it at an acceptable price. And even if they find someone, it will usually have to be a tourist as Moroccans in general don't have the big amounts of money that they ask of us lot. Besides the which, a tourist will likely have overpaid when they bought the property in the first place (because they didn't spend enough time in haggling the price, like the locals do.)
One Title for the property - Leasehold and another for the Land that the property is built on - Freehold. It is common practice with new-builds in Morocco that the freehold is kept by the seller. And property within residential developments is usually always subject to annual maintenance charges. Nothing new here then. Morocco is not alone in this procedure. The difference being that in Morocco if the property is a house, it might be possible to arrange the transfer of the freehold either free of charge or at minimum cost as part of the purchase agreement. I know someone up the coast north of Agadir who managed to do this. Definitely worth asking about. No ask, no gain.
Be sure to check out the amount of the annual ground rent written into a leasehold sales contract before you sign it, including any future increases. Maybe double check with a trusted Moroccan lawyer friend in order to have a second opinion of what is being proposed in this context.
Old houses in the medinas of Morocco have always been freehold. I saw one of these freehold documents when I was visiting Tangier in October 2000. It was written in ancient Arabic script, over a hundred years old and looked like it belonged in a museum. These ancient Titles are always given in a property sale (either to the buyer or the lender) as standard procedure. All one needs to do is find such a property for sale, which may not be so easy. These freehold documents are typically handed down within families from generation to generation and hardly ever leave the family to reach the property market. They are usually not even legally updated to show the current owner of the property.
You Buy It, You Own It
Selling a property in Morocco (or anywhere else) is only worth as much as what the current market dictates and if the seller doesn't get an offer that they like then they may not be able to sell the property without incurring a loss.
Location, Location, Location
Property in Agadir is expensive to buy; mainly because of regulations that exist to ensure that property is built to earthquake resistant standards. Some owners who have been unable to sell their property later decide to rent it out through a lettings agent. If the property is not in a central area, they may then find that they are about to enter into yet another potentially difficult, competitive, rental market because block apartments in the far-out suburbs will be unlikely to achieve city centre rental amounts. Central and suburban rents are not the same thing and have a different clientèle, a proven fact in that the majority of Moroccan people who work in Agadir live in places like Inezgane.
I doubt that many westerners could be found who would choose to rent and live in an apartment block several kilometres away from the centre of Agadir, (think of all the petit taxi fares, for starters) even if some westerners themselves choose to buy there because of the lower purchase price of a property. Not everyone likes muddy, unmade streets that become flooded in winter and people watching your comings and goings out of their curtains. Yes, you could likely be a stranger in the midst and would maybe soon begin to yearn for the cosmopolitan, laid back central areas of Agadir where other westerners live and tourists visit. People to talk with and develop friendships with other expatriate folk.
Selling Up: God Bless the Child Who's Got His Own
A possible exception to the difficulty of selling property for at least, or more, than one paid for it, concerns a single "premier" property which is not located inside of a city property development which currently has unsold apartments. An example of such a premier property could be a large, original property that has been converted into a villa, up along the northern coast north of Agadir, or a few kms out of town in a secluded mountain area, with a luxury interior and having fabulous panoramic views. Such a property would likely sell very quickly to someone from one of the Gulf states. People who talk in the language of a few million Euros as if it is pocket money.
Aftermath of the 2008 financial crisis vis-a-vis property sales
I remember reading in the press around 2010 that some riads in Marrakesh had lost up to 40% of their value and that financially pressed owners from Europe were having difficulty in selling their riads in order to resolve their financial positions in their home countries.
This on Marrakesh from the Financial Times:
"Yet despite Morocco’s timeless ability to mesmerise the étranger, the country’s property market was badly knocked by the 2008 global crisis. Prices remain up to 50 per cent below the peak of 2007, according to Alex Peto of Kensington Luxury Properties, the affiliate of Christie’s in Morocco. "You don’t need to be a millionaire these days. You can get something special from as little as €150,000," says Grant Rawlings of property agency Chic Marrakech. "It’s not Monaco."
This on Essaouira from the Financial Times:
"Evidence of the hangover can be found in the stony fields around Essaouira. Skeletons of incomplete Moorish-style, traditional stone villas abound after developers folded or pulled the plug when prices plummeted. In the city, developers have stocks of unsold apartments. In contrast, a development of three- to five-bedroom villas with pools recently completed adjacent to the Sofitel Essaouira Mogador golf and spa resort sold out at prices ranging from €500,000 to €1.3m."
December 2013 "Tourism and retired foreign residents"
"Tourism, old and wealthy foreign residents significantly contributed to making the demand for housing reach all-time highs. The 2003-2007 touristic boom and the subsequent state’s aggressive strategies to encourage the sector, naturally made property appreciate. This was particularly the case in cities like El Jadida, Marrakech, Agadir, Tangiers, Casablanca and Rabat."
It is worth mentioning at this point that the majority of people who buy residential property in Morocco are perfectly happy folks who don't have any problems connected with their property.
One thing to remember is the considerable risk of buying off-plan (buying a property that has not yet been built) however much it may sound appealing by the sales pitch as there are stories of fraudsters disappearing with the money (same kind of thing happening in the Red Sea area of Egypt,) which could make this proposition to be very risky (see links, below.)
Thank you for reading. I hope this page has been helpful and I wish you much happiness in Morocco.
November 22, 2009
Updated January 7, 2018
Premier League stars face massive losses in £200m Moroccan villa nightmare:
"Embarrassment for Terry and Ferdinand as project they backed flounders"
"Beware the foreign property scams"
"Commercial property consultant Jones Lang LaSalle publishes an annual global transparency index, ranking countries and cities by risk. It comes as no surprise that emerging markets such as Egypt, Tunisia and Morocco have a low transparency level, whereas developed economies with strong legal systems are rated higher."
Retiring to Agadir
Renting a Property in Morocco
So What's to Rent? High-End, Mid-Range and Least-Expensive Property Rentals
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