Ethiopia is witnessing an unprecedented surge in real estate prices, leaving both developers and homebuyers perplexed. Here’s a breakdown of the key factors driving this price escalation.
- Construction Input Prices Continue Rising: The cost of building a house has soared due to escalating construction input prices. Cement, for instance, now costs over 2,000 birr per quintal, more than double its price from just a year ago. Rebar, a crucial construction material, has also seen a significant price increase, reaching up to 130 birr.
- Unmatched Growth in Demand and Supply: Ethiopia has experienced unmatched growth in both the demand for and supply of housing. This surge has driven up the prices of all types of houses, creating a competitive market.
- Cost per Square Meter: On average, it costs about 35,000 birr per square meter to build a house, excluding land expenses. Land scarcity is a major factor behind rising property prices.
- Breakdown of Construction Costs: The majority of the construction budget goes into direct costs like purchasing materials (cement, rebar, etc.), constituting around 60%. The remaining 40% includes indirect costs like overhead expenses and profits, especially for commercial developers.
- Impact of Labor Costs and Supply Chain Disruptions: Rising labor costs and disruptions in the supply chain have further elevated construction expenses, making it even more expensive to build.
- Heavy Reliance on Imports: Ethiopia heavily depends on imports for construction materials. The instability in the foreign exchange market and the scarcity of foreign currency have caused input costs to rise significantly.
- Impact on Final Housing Prices: All these factors are collectively reflected in the final pricing of housing units. Residential flats can now cost up to 75,000 birr per square meter, with foreign developers charging even higher, up to 120,000 birr.
To address the issue of high real estate prices in Ethiopia, efforts are needed to stabilize the foreign exchange market and invest in local production of construction materials. These steps are crucial in ensuring affordability and accessibility in the housing market.