Image: New housing in the outer Port Moresby suburb of Baruni Credit: BAI
Demand for residential houses among the growing urban population, especially in Port Moresby, has increased but the supply of quality and affordable houses has seen prices rise ‘exorbitantly’, according to a new survey of the housing market by consultancy Niugini Land and Property.
Niugini Land and Property’s online survey has revealed the budget of many prospective homeowners is around K200,000, which is half the average cost of land and house in the present market (about K400,000).
Dr Lindsay P. Kutan, Managing Director of Niugini Land and Property, tells Business Advantage PNG that he is surprised that prospective homeowners expect to pay only K200,000, ‘when the cost of construction and development of properties are high’.
‘For instance, building a residential estate like the Skyview Estate at 7-Mile, the input costs are excessively high.
‘These input costs includes labour, building materials (usually imported), the construction of the trunk infrastructure (which include the roads, sewerage and electricity), and accessing state leased land.’
The survey indicates timber based stand-alone houses were the most preferred. The starting price for this type of property in the market is between K500,000 and K800,000, depending on location and property size.
Cheaper
Government supported projects can be cheaper, even in Port Moresby. A new project launched last month near Eight-Mile, just outside Port Moresby, by the National Housing Corporation, aims to deliver 5,000 houses by 2017 in the first phase of the project and a total of 44,000 new homes by 2020.
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Three-bedroom houses will be sold for K350,000 each and the five-bedroom houses will be sold at K450,000 each.
‘Greater availability of home finance is essential for an increase in home ownership.’
Port Moresby emerged as the most preferred location to purchase a property, followed by Kokopo/Rabaul and Lae. For Port Moresby, the most preferred suburbs were the established suburbs of Boroko, Korobosea and Five-Mile.
First home ownership scheme
Greater availability of home finance is essential for an increase in home ownership. According to BSP’s Home Loan Manager, Richard La’a, BSP has funded over 218 loans at a total of K 74.95 million for first home buyers under its First Home Ownership Scheme (FHOS). The product was launched in 2014.
‘The majority of these first home-buyers purchased in Port Moresby,’ he tells Business Advantage PNG.
‘It’s hard not to argue that access to land is a major inhibiting factor.’
‘The demand for home loan product outside Port Moresby has also increased with regular enquiries for more information on the product.’
Dr Kutan says while the FHOS is a good government policy initiative that has increased demand for housing, the government should address binding constraints on the supply side.
‘These include increasing the stock of land with secure land titles, encouraging tax incentives for property developers—particularly reducing the import duties and stamp duties—and addressing skilled labour shortages in the construction industry.’
‘There is a strong investment boom led by the private sector in the property market.’
Brian Byer, the Chief Executive Officer of the online housing website Hausples agrees there is a need for more affordable housing.
‘There’s an enormous opportunity for people to enter into projects which have a standard size block with three or four units sharing recreational space, or even some shared living space.
‘It’s hard not to argue that access to land is a major inhibiting factor. But the other challenges are the high cost of construction, particularly materials, and the lack of skilled builders.’
Investment boom
‘There is a strong investment boom led by the private sector in the property market,’ says Dr Kutan.
‘For instance: the new residential development of the Skyview Estate and Glory Garden Estate by the Glory Group of Companies; development of EDAI Town, by JC-KRTA Consulting Group and the Boera Holdings; and residential properties offered by South Pacific Homes, a joint venture between Curtain Bros and Parkside Group.
‘The property market and informal housing sector is not well organised’.
‘These private companies within the last decade have invested confidently in the property market. At the same time the new ring road developments around Port Moresby have also opened up Greenfields that can be accessed for property development.’
Rental market
The National Research Institute reported in July that, on average, houses are being rented for K2,000 per month in Moresby which is more than the salary of low income earners.
Professor Eugene Ezebilo said an apartment in town costs K3,629 a week rent and K633 at Nine-Mile, adding: ‘The property market and informal housing sector is not well organised’.
He said rents were high because of reduced import duties on building materials, lack of basic infrastructure and limited sourcing of local building materials.
Byer says rents have dipped about 15 per cent since the end of the construction phase of PNG’s first LNG plant.
Copyright © 2016 Business Advantage International.
