Soaring Home Prices Spelling Long Engagements in Algeria

When Salim Medhi returned to his native Algeria after a five-year stint in Canada, he didn’t think he’d still be living with his parents eight years later.

The 36-year-old accountant brings home 170,000 dinars ($2,000) a month, about four times the average household income in the North African country, and more in line with wages in Greece and Portugal. Yet with real estate prices rising by more than six-fold in the capital Algiers in 10 years to an average of 200,000 dinars per square meter, and no access to a mortgage, he can’t afford to buy his own home.

“It’s crazy what is happening in Algeria,” said Mehdi, recounting his efforts to purchase his first home and marry his fiancée of four years. “With the current prices per square meter, I could buy a house with a garden in Montreal.”

The shortage of affordable housing has sparked tension in a country ravaged by civil war throughout the 1990s, though Algeria so far has avoided the sort of unrest that spread across the Arab world over the past three years. While the government of President Abdelaziz Bouteflika increased housing subsidies and brought in foreign companies to speed up building projects, there have been sporadic riots across the country, including one in the coastal town of Jijel last week.

Higher earners like Mehdi are caught between two areas of the market. They aren’t part of the group of wealthy Algerians investing in property to shield savings from inflation, reducing an already limited supply of properties. Nor are they among the most needy the state is offering aid to.

Rampant Inflation

Home loans are hard to come by in Algeria’s underdeveloped mortgage market, where sellers prefer cash. What’s more, the inflation rate rose to a 15-year-high of about 9 percent last year before falling to about 4.8 percent this year.

“The government is aware that this is one of the triggers, potentially, of a revolt,” said Riccardo Fabiani, a North Africa analyst at Eurasia Group. “Memories of the civil war is still probably the biggest factor in containing social rage, but the question is how long does this last?”

Nicknamed “La Blanche” for its white-washed French colonial houses, Algiers sprawls over hills facing the Mediterranean Sea and is home to about 3.5 million people, or about a 10 percent of Algeria’s population.

In the suburb of Garidi, an 80 square-meter (860 square-foot), three-bedroom apartment sells for about 18 million dinars compared with about 3.6 million dinars in 2003, local real estate brokers say. That’s about 27 times the average household salary of $500 to $700 a month.

Diplomatic Quarter

Those seeking a home in areas such as Hydra, where diplomats and expatriates live, can expect to pay about 170 million dinars for a six-bedroom villa with a roof terrace.

Mehdi left for Canada after graduating from university, choosing Montreal because French is spoken in the city. He returned to Algiers in 2005 after his father became ill. The most he can afford to spend on his own home is $50,000, the equivalent of about 4 million dinars, he said.

“I want a three-bedroom apartment in a nice neighborhood, but 13 million dinars is above my means,” Mehdi said in an interview on Nov. 25. “I’m not above looking in poor areas, but even that’s beyond my means.”

Prices in Algiers range from about 100,000 dinars per square meter in the poorest and most crime-ridden areas to about 300,000 dinars in the best neighborhoods, according to Abdelhakim Aouidat, president of the Federation Nationale des Agences Immobilieres. Setif, Oran and Constantine follow Algiers as the priciest cities or towns, he said in an interview.

Not Affordable

Algerian real estate is the most expensive in North Africa, Aouidat said.

“When an apartment cost 3 million dinars, it was more or less affordable,” said Issam Rachdi, director of a real estate agency in a western suburb of Algiers. “When it costs 10 million dinars, that’s really tough.”

There have been numerous riots in Algeria since the civil war ended in 2000, a conflict that was triggered when the government annulled elections Islamists were set to win. As many as 200,000 people lost their lives.

In Jijel, a town about 400 kilometers (250 miles) east of Algiers, about two dozen policemen were injured in riots on Nov. 26-27, the El Khabar newspaper reported. About half of the recent unrest has been about housing, said Fabiani at Eurasia Group. There have also been protests about unemployment, rising food prices, salaries and corruption.

Widespread Poverty

About 23 percent of Algerians live below the poverty line in a country whose oil and gas reserves account for about 98 percent of export earnings, according to official data. The minimum wage is $168 a month.

After independence from France in 1962, Algeria had about 2 million homes for 9 million people. Now, it’s got 8 million houses or apartments for more than four times that number.

“It’s not enough,” said Aouidat, the Federation Nationale des Agences Immobilieres president. “We need at least 18 million homes to solve this crisis and whatever the state does, it won’t be able to fix this problem quickly.”

For the moment, the government is focusing housing efforts on the poorest people.

It has allocated $60 billion to projects and is speeding up the pace of construction by bringing in foreign companies to partner with local firms. Fomento de Construcciones y Contratas of Spain, Italy’s Costruzioni e Servizi, and China State Construction and Engineering are among them.

Housing List

Mehdi added his name to the official housing list, though he isn’t eligible for help. “For them, I’m rich,” he said.

“The average Algerian is caught between a rock and a hard place,” Fabiani said. “There are state-owned banks that hold the majority of assets, but to get a mortgage you have to have the right connections, and private banks are worried about extending credit because there isn’t enough information on whether people can repay or not.”

Interest rates on home loans in Algeria are currently about 6.5 percent.

With rising prices, rental properties are the only option for many Algerians, though there are no official statistics.

“Prices are beyond belief,” said Zine Eddine, a 38-year-old senior manager in an Algerian agribusiness company, who along with his wife have a combined monthly salary of 300,000 dinars. “I’m condemned to rent forever.”

Rents range from $300 to $1200 a month. A three-bedroom apartment in Belcourt, a poor neighborhood where writer and philosopher Albert Camus grew up, costs about $250 a month. That’s the same price as a studio in the city center, near to the Scared Heart Cathedral built by Le Corbusier.

For Mehdi, the temptation of returning to Canada is getting stronger. “My parents needed me,” he said. “But I never imagined it would be like this in Algeria.”

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