What makes apartments in Addis Ababa so expensive

WEEKEND READING – BY ANDUALEM SISAY GESSESSE – Kebede Mohamed (not his real name) is a father of three and was registered for the government condominium housing project and began saving a few months before the May 2005 general election of Ethiopia. Fifteen years after, he still hasn’t got a house. “Well may be my tribe will not qualify me for a government condo. That could be the reason I didn’t get one so far. Perhaps my grandchildren will get one,” he says making fun of the ethnic politics of Ethiopia.

In Addis Ababa house rent consumes 50 to 60 percent of the income of a family. In what looks a political move to solicit support for the May 2005 general election, the ruling party on power has launched a condominium program. The program is aimed at allowing the low and middle income residents of Addis to save up to 30 percent of the total cost of the condo and qualify for the government subsidized housing program.

Today many inhabitants like Kebede have lost hope their hope on the government condo as some seem to convince themselves that the government housing program wasn’t meant to serve the public equally in the first place. Now many people in Addis Ababa are looking into other options such as, trying to own an apartment built by private real estate developers with long term payment plans.

In recent years many private banks have also began financing such housing projects to make inhabitants of Addis house owners. In addition, new private banks such as Goh Betoch Bank, and Jano Bank are currently offering their sharing claiming that their target is to finance housing development in Addis Ababa and other cities.

So Expensive
Meanwhile the current price for a square meters of land in Addis Ababa, has been mentioned as one of the most expensive one in the world. At times the price for an apartment exceeds the price for an apartment in some of the well-developed countries in Europe such as, UK, Germany and Portugal.
Today the price for a two bedroom apartment in Addis Ababa central area is almost the same as in Manchester, Liverpool, Lisbon City or in Leipzig City of Germany, which about $200,000 on average.

Engineer Abeje Genzebe is the Founder and Manager of Engineer Abeje Construction and Real Estate Private Company, which has been in the business for the past ten years. He says the price of apartments built by private real estate developers in Addis Ababa is not normal and logical.

Forced migration to Addis Ababa
He argues that the abnormality of the market shows the failure of the government to properly regulate the sector and its incapability to resolve the instability in regional towns of the country that forcing thousands to flood into Addis Ababa seeking safe heaven.

What makes apartments in Addis Ababa so expensive
Eng. Abeje Genzebe, CEO Abeje Construction & Real Estate

The ethnic politics driven displacement of people from other towns and cities and migration to the capital is already putting heavy pressure on basic infrastructures of Addis Ababa. Today many houses can get tap water once in week if lucky, while some pockets of the City are waiting for electric power supply for years.

“In my view in order to provide affordable and decent houses for the inhabitants of Addis Ababa, the Government has to be able to stop the continuous displacement of people from regional towns and cities. This needs political decision and action on the ground,” he suggests.

“In the face of such politically motivated displacement and migration, no matter how hard the Addis Ababa City Administration tries, it can’t bring down or stabilize the growing cost of renting a house or buying an apartment in the capital. First the politics needs to be fixed and the huge number of people being forced to migrate has to drop to a reasonable amount. That is when the Addis Ababa City Administration can plan on how to sustainably solve to address the growing cost housing in the City,” Eng. Abeje says.

Heavy tax on apartment renters
At the moment the majority of the apartments being developed are owned by the same few groups or classes of people who already bout many of similar houses and engaged in renting the apartments for expats, NGOs, some middle class people.

Eng. Abeje argues that the current price of apartments didn’t take into consideration the purchasing power of the majority of the working classes in Addis Ababa. “Let alone to buy an apartment, a PhD holder in Addis Ababa can’t even afford to rent and live in these apartments. As a result land on which these apartments are constructed on, which belong to the public as stated in the constitution are being abused by the few who have the money,” he says.

“To address the problem the other measure the Addis Ababa City Administration should put heavy land tax (up to 70%) for the land these apartments are built on. So that these few groups of people who own many apartments and engaged in rent collection using the public property, will be discouraged from replicating the same unproductive exercise, according to Eng. Abeje.

Increase land supply, bring foreign companies
One of the reasons that makes the cost of private real estates developed apartments is because the City Administration is only supplying small plots of land for developers at a time. He suggests that the supply the size of land the City Administration announces to be leased by private real estate developers has to be increased.

“The shortage of housing is exacerbated because the Administration is making available only small volume of land for private real estate developers. As the supply of land is too small compared to the continuously growing demand for housing in Addis Ababa, many real estate developers compete to lease for the same small size of land. What they do after the won the leasing bid is add that inflated price on the apartment buyers. That makes buying a house in Addis Ababa for the majority of the inhabitants is impossible,” he says.

He advises that the Addis Ababa City Administration has to look into innovative approaches such as, inviting foreign real estate developers, which have the latest housing technology and providing them with enough land for cheaper lease price than the current one or even for free. “The City Administration has to find other alternatives of income that replaces the income it has been getting from selling land for a huge amount of money,” Eng. Abeje suggests.

In the current Ethiopian situation where the politics and business are highly linked with ethnicity, as well as in a country few groups have accumulated dirty money by engaging in corruption and organized crimes, it will be a very long way for working class inhabitants of Addis Ababa like Kebede to become an apartment owners.