Through the Roof – Spike in Housing Rental Prices Leaves Residents in a Bind

On the evening of Tuesday, March 25, 2014, Girma Ayele was playing with his two and half year-old daughter. His wife, Hana Kebede, was packing a dinner for him, ready for when he headed off to the Ras Desta Hospital,on Arbegnoch Street, in Gulele District, where he was working a night shift in the Card Section.

All this was taking place in their 1,100 Br a month rented one-room house, around Piazza in Arada District, behind St. George’s Church.

“We were living in a two-roomed house, paying 1,900 Br a month for several months,” Girma says.”But we moved to this house five months ago after the owner asked us to increase the rent to 2,200 Br.”

With a monthly salary of 2,400 Br from Girma and an additional 800 from his wife, who works as a librarian, the family of three are able to save 489 Br a month. They put this aside for the three-bedroom condominium house they hope to own, having registered in the 2080 housing scheme in which the client pays 20pc of the cost of the house. This is one of the three housing schemes – alongside the 1090 and 4060 – developed to replace the substandard accommodation in the City and fill the supply gap in the capital’s housing market.

However, with rental demands increasing, being able to pay the rent and save 489 Br for the housing scheme has caused a considerable strain on the family.

As if this is not enough, another challenge is now threatening to put additional strain on the family coffers next year, with their daughter set to start school.

“I do not know if all the expenses are going to be bearable for my family,” he says.

The current average price of a one-room house in Addis Abeba is 1,450 Br – up from 950 Br six months ago. This is according to prices Fortune compiled in March 2014, from brokers working in the three major areas of Bole, around the former Japanese Embassy (in Bole District), CMC (also in Bole District) and the Gabriel area (in Nefas Silk Lafto District). The price of two-bedroom and three-bedroom houses has also shown a significant increment, according to the same data. The average rental price of a two-roomed house now stands at 3,600 Br, up from 2,800 Br, while the price of a three bedroom house with private facilities has reached 11,000 Br, from 7,750 Br six months ago. Large houses have an average rental cost of 44,000 Br, up from 36,500 Br.

The dramatic increase in house rental prices over the last six months is due to the steadily growing population of Addis, according to some brokers approached by Fortune.

“A house that cost 950 Br six months ago has now reached 1,450 Br,” says Misikir Gebru, the general manager of Ethiopian Delalaw Brokering Plc.

Shemsu Ali, a broker covering Qera, Gotera (both in Nefas Silk Lafto District) and the Teshale Garage area of Kirkos District, says that rent has been shooting up since numerous Ethiopians were repatriated from Saudi Arabia.

“If a tenant who lives in my house refuses to pay the new price, someone else will pay it,”says Almaz Yemane, a landlady in Arada District. “This gives me confidence to evict them and rent it out to someone else.”

The estimated demand for houses stood at 311,432 in 2010, whereas the total housing supply was only 70,000 units – displaying an outstanding housing demand of 233,143 housing units. This is according to data obtained from the Addis Abeba City Administration.

The data also shows that the total estimated housing demand would escalate to 475,450 units in 2015.

The Addis Abeba City Construction amp Housing Development Bureau began the construction of condominium houses,with the view of overcoming the problem caused by the undersupply of housing.

The registration of people eligible for houses was conducted in 2013 under the three schemes.

Approximately 700,000 people are registered under the 2080 and 1090 schemes, with a requirement to save 20pc and 10pc of the total cost of the houses, respectively. Just 23,000 out of the 700,000 are registered for the 1090 housing scheme, with the remaining 677,000 house seekers registered for the 2080 scheme. The construction of 121,000 houses under this project is currently taking place at 15 sites across the city.

The cost for a studio, one- bedroom, two and three-room apartment, under the 2080 scheme, is 61,000 Br, 126,000 Br, 224,000 Br and 304,000 Br, respectively. Registrants for this scheme will save 196 Br, 401 Br and 489 Br over seven years, for the one, two and three bedroom houses, respectively. The saving period extends between five and seven years.

Approximately 164,779 people have been registered in the 4060 housing scheme, saving 40pc of the total price of the house over five years.

One, two and three bedroom houses under the scheme cost 162,000 Br, 250,000 Br and 386,000 Br, respectively. The monthly saving for one, two and three bedroom houses is 1,033 Br, 1,575 Br and 2,453 Br for five years, respectively.

Jemil Wulchafo is a teacher at the Dagmawi Tewdros Elementary School in the Addis Ketema District. Jemil, who earns 1,674 Br a month, lives at a place called Sefere Selam in the same district. Here, he pays a monthly rent of 900 Br, up from 700 Br two months ago. He is registered for a one-bedroom house in the 2080 housing scheme, for which he had been saving 189 Br every month. Since the rental hike, he no longer saves for the house he hopes to have some day. He made the decision after weeks of searching for a cheaper house to rent.

“In cases where such houses were available, it meant that I had to pay additional cost because the houses were located far from where I work,” he said.

Out of a total of 385,698 rental housing stock, 222,384 are privately owned, 148,645 owned by kebele administrations, 11,388 from the Agency for Government Houses (AGH)and the remaining 3,281 rented from other organisations, according to the latest census data from the Central Statistics Agency (CSA).

There are construction works going on in all districts, with progress ranging from as little as 6.6pc, in Akaki Kaliti District, to 12.1pc in Kolfe Keranio.

Selamu Tadesse, who works as a cameraman at a state owned media company, has been living around Ayer Tena in the Kolfe Keraniyo District for the last four months, paying 600 Br in rent.

He moved to Ayer Tena, a relatively far out residential quarter, from the area around the Black Lion Hospital on Yared Street -close to the city centre.

“I was living in that house for the last one and half years, with initial rent of 400 Br,” he said, reminiscing.”But it soon escalated to 1,000 Br.”

After starting to save for the 2080 scheme, however, he changed his place of residence to Ayer Tena, where he managed to find a place with lower rent.

“Even though Ayer Tena is far, I do not have to worry, as the company I work for gives free transport service to its staff,” he said. “The additional benefit is, of course, being able to save money.”

Saba Moges, a mother of two, works at the Bank of Abyssinia and earns a monthly salary of 1,500 Br. Her husband also works in the same company as an accountant, with a monthly salary of 5,600 Br.

The couple pay 1,500 Br for house rent and 401 Br for the two-bedroom condominium house they hope to own through the 2080 scheme. But this is in addition to paying for their children’s school fees and other monthly expenditure.

“It’s really very straining,” Saba grumbles.

Among the 15 sites in the 2080 scheme, six are ready to be allotted to house seekers, as the progress of the construction has reached 80pc, according to data from the Bureau.

The data, however, shows that the Bole Arabsa site (in Bole District), where 20,000 houses are planned to be built, has a lag in construction progress.

Construction in sites, such as Bole Arabsa, located in remote areas, are characterised by a lag, because of infrastructure problems and the unavailability of sanitary equipment in the market, says Kasa Woldesenbet, head of the Communication Affairs Core Process at the Bureau.

Construction of the 4060 houses started in 2013, with a plan to complete within 18 months.

On seven sites across four districts the construction of 6,048 houses under the 4060 scheme is taking place.These have currently progressed by an average of 19.15pc. The highest progress is in Lideta District, with 45.4pc, and the lowest progress Kolfe Keranio District, with 12.4pc.

The construction of an additional 8,036 houses will start before the end of the current fiscal year, says Yohannes Abayneh, head of Communications at the Addis Abeba Saving Houses Development Enterprise.

For some observers in the housing industry, the escalating house rental prices, unless checked, will surge beyond recognition. One of these observers, Tsedeke Yihune (Eng.), general manager of Flintstone Engineering, suggests that the government must equip itself with a regulatory body to stave off the deleterious effects of further increases. The government is better off getting itself out of construction and giving the work to real estate developers with the capacity to build on 1,000 to 2,000sqm of land.

Facilitating access to land and capital for real estate developers are remedies that could solve the housing problem in the city at a policy level, he suggests.

Source : Addis Fortune

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