Morocco To Become A Top Med Destination By 2010

Matthew Peters - Mon 21 May, 2007

In 2001 the Moroccan government launched Vision 2010, an ambitious plan to increase the number of overseas tourists from 2m pa to 10m pa by 2010 and make the country attractive for second home buyers, in particular from the UK, Germany and Switzerland. The plan, if successful, will diversify away Moroccos reliance on France for tourists and replace it with a reliance on Western Europe. Morocco has a lot to offer, it is considered a good value family destination with plenty of historical and cultural heritage, near and convenient for European travellers, but maintaining its unique charm...

Humphrey Bogart’s parting shot to Ingrid Bergman in the epic “Casablanca” was “here’s looking at you kid”. The film shot in the former French protectorate (1912-1956) depicted a romantic, peaceful enclave away from the nightmare of World War II. In some respects the same is true today Morocco remains a scenic place, with varied landscapes, a mix of old world charm and luxury amidst a rapidly modernising economy. Best of all its less than three hours flying time from Heathrow!

The Kingdom of Morocco is double the size of the UK but with a population of 33m, relatively large by African standards. Following the death of King Hassan in 1999 his son King Mohammed VI was crowned in July 1999 with a view to maintaining the emphasis on modernisation. His father had once remarked “Morocco is like a tree with its roots planted firmly in North Africa, but whose branches extend over Europe”. King Mohammed VI wants to boost Morocco’s international profile, encourage foreign direct investment in particular the tourist industry, mining and infrastructure development. This will involve the building of roads and upgrading regional airports, in particular in the Northern Mediterranean coastal areas, Saida and the Golden Mile and other large scale long-term projects such as the Morocco Film City, a huge €1.3bn development near Marrakech, “the red city” that will house film production studios, theatres, condominiums, hotels and conference centres. The modernisation of Morocco is underway and it might not be long, 2010-2012 by some estimates before significant areas start to resemble Dubai.

The local currency the Moroccan dirham (MAD) has traded at 11/€ for some considerable time. It is pegged to a basket of currencies (heavily weighted by the € but also including the Yen and US$). The central bank, the Bank al Maghrib held reserves of US$16bn by end 2005 and has a core mandate of achieving price stability. Interest rates have held steady at 4.5%. Apart from a single 5% devaluation during the early Nineties the dirham has been stable. An investor approaching Morocco should consider it to be an investment in a currency closely tied to the Euro.
The climate is tropical; a rainy season from January to April is followed by very hot weather during the dry season from June to September. Most Moroccans live west of the Atlas Mountains, a range that insulates the country from the Sahara Desert. Casablanca is the centre of commerce and industry and the leading port; Rabat is the seat of government; Tangier is the gateway to Morocco from Spain and also a major port; Fez is the cultural and religious center; and Marrakech is a major tourist centre. However the coastal area in the North, “The Golden Mile” on the Mediterranean and Saida are seeing the benefits of large scale infrastructure projects aimed at created a North African Riviera.
Morocco has an ambitious government eager to “up its game” 

In 2001 the Moroccan government launched Vision 2010, an ambitious plan to increase the number of overseas tourists from 2m pa to 10m pa by 2010 and make the country attractive for second home buyers, in particular from the UK, Germany and Switzerland. During 2006, around 6.5m tourists visited Morocco. The plan, if successful, will diversify away Morocco’s reliance on France for tourists and replace it with a reliance on Western Europe. Morocco has a lot to offer, it is considered a good value family destination with plenty of historical and cultural heritage, near and convenient for European travellers, but maintaining its unique charm. 

To encourage tourism by facilitating its “Open Skies” policy of deregulating international flights, “Atlas Blue” a budget airline subsidiary of Royal Air Maroc, the national carrier currently flies to 11 major EU cities from Marrakech. In July 2006 Easyjet started flights from Gatwick to Marrakech. Air France, British Airways, Ryanair, Easyjet and Atlas Blue are all operating weekly flights to Morocco. Ryanair is planning to expand the number of Moroccan routes from five to 20 by 2010, it expects to carry 1m passengers pa on these routes by 2010.

Tourist numbers are rising steadily in the nine month period to end September 2006 the number of visitors to Morocco was 9% ahead of 2005 with the average spend per tourist up 26%. The government appears to be reaching its target audience in the EU at least, notwithstanding the Casablanca bomb attacks in 2003.

In our view, Morocco is coping well with the challenge of being proximate to, yet outside the EU, the world’s largest trading zone. It concluded a free trade treaty with the United States which came into force in January 2006. A free trade agreement with the EU will come into force in 2010. However Morocco is still a relative unknown in international financial circles, excluding France and Spain whose commercial banks own controlling stakes in Moroccan banks. According to the Casablanca stock exchange only 10% of shares are held by foreigners.

The main advantage for investors who take a positive view on the country’s economic development is the fact that real estate can be acquired for around one third of the cost of similar properties in Spain and Portugal, yet due to the similarity of climate between the Spanish Med and the Morrocan Med (which at its narrowest point the Straits of Gibraltar is just 14 kms in terms of distance) the “lifestyle” difference in ten years time is likely to be negligible. At some point Moroccan prices may converge with those of southern Spain as the new developments arrive.

Favourable legislation aimed at attracting “second home” Europeans

Anyone can buy Moroccan property whether as a holiday home or an investment. To discourage short-term speculation the government levies a 20% capital gains tax on properties sold within five years of purchase, this tapers down to 10% within ten years and 0% thereafter. There is a 0% inheritance tax if your property is left to members of your family. There is 0% tax on rental income for the first five years. Post the tax holiday there is a 10% levy on rental income. A dual tax treaty between the UK and Morocco means the taxpayer can elect in which jurisdiction tax is paid.

The Moroccan government is also tidying up the land registry issues, ensuring that older properties that may not have title deeds are listed. This process will ease the problem of establishing title that some investors have experienced.

Flash new developments are underway, the Sama Dubai company is building the Amwaj project, a $2bn community development near Rabat that is likely to complete in mid 2009. Emaar Properties Dubai is building coastal developments near Saida. The off plan apartments at Saida start at around €140,000 for delivery in 2009, but these are at significant premiums compared to properties elsewhere.

Saida deserves special mention, and is to be recommended for those seeking a Mediterranean environment. It has over 20kms of white sandy beaches, 17 beach clubs, a bird reserve and eucalyptus forest. The Oasis Beach & Golf Resort will be marketed by Insight-Morocco will feature a complex with penthouses, apartments, townhouses, a clubhouse set in the midst of three 290sq km golf courses, a marina and spa centre. Further detailed documentation on the development and a wealth of information on Morocco is available free on www.insight-morocco.co.uk.

The government by attracting the multi-nationals, Dell Computer, IBM, Nokia, Marks & Spencer has helped encourage expectations of rapid property price appreciation. With the multi-nationals come high paid expatriates and a more affluent middle class. It is no wonder the property sector received the largest share of the FDI (foreign direct investment) in 2004 according to the European University Institute. The potential for prices to rise by 15%-30% pa is very real given the fact they are starting at such a low base.

There is no shortage of Moroccan property according to the websites; www.propertymartoverseas.com ; http://www.headlands.co.uk . It is its worth deciding on your budget first. It is worth visiting Morocco and obtaining a selection of properties at different price levels. For Morocco having two price levels; €70,000 and €120,000 casts the net relatively wide for Casablanca, Marrakech and Tangier properties. However to get something decent in Saidia, that means buying into a new development which is likely to cost around €140,000 upwards. For these new builds typically payment instalments are 10% payable on contract, 20% on the start of building works (expected end 2007) with the balance 70% on completion in Q2 2009.
Morocco is clearly worth investigating, if only for a long weekend away. Its proximity to Europe will make it a favourite destination in years to come. 

Regards

Mathew Peters
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