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Understanding
Tunisia's
Housing Finance Market
08 December 2016
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Le CAHF est heureux de vous annoncer que suite à la formalisation d'un partenariat stratégique avec l'Agence Français de Développement (AFD), ses ressources seront bientôt disponibles en Français. Vous pourrez ainsi à partir du début de l'année 2017 avoir accès à l'intégralité du site internet du CAHF en langue française, et recevoir les différents bulletins d'informations, documents de recherches, analyses pays et sectorielles, en Français.
L'objectif principal de ce partenariat est de soutenir le développement et l'approfondissement du financement du logement en Afrique francophone, en fournissant des données et des informations sur le marché, ainsi qu'en favorisant le renforcement des capacités des acteurs clés. Ce programme soutiendra les décisions d'investissement des parties prenantes et le développements de politiques publiques conduisant à un investissement accru dans le logement abordable et le financement du logement en Afrique. Le programme facilitera également l'échange actif d'expériences, d'études de cas et de données entre l'Afrique francophone et l'Afrique anglophone.
Pour toute information complémentaire, veuillez contacter Olivier Vidal à l'adresse suivante: olivier@housingfinancefrica.org.
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Before the revolution of 2011, Tunisia was widely regarded as one of the best performing countries in terms of economic and human development of the Middle East and North Africa (MENA) region. After the instability and associated slowing economic growth, the country rebounded, adopting a new constitution in 2014.
However, GDP grew only by 0.8 percent in 2015 against 2.3 percent in 2014, the lowest since the 2011 economic slowdown. The drop in the national savings rate (12.2 percent of GNDI in 2015, against 14.4 percent in 2014), along with the investment rate regression (19.4 percent of GDP in 2015, against 20.6 percent in 2014) meant an increase in external financing needs.
The unemployment rate recorded in 2015 was 15.4 percent, increasing from 15 percent in the fourth quarter of 2014. Women’s unemployment rate is higher at 22.6 percent, while the graduate unemployment rate is 38.7 percent, with higher education graduates at 31.2 percent.
Housing is the second largest item of expenditure for Tunisian households. Although housing is increasingly available, its affordability is increasingly problematic, especially since 2011. Increased demand, more onerous liquidity requirements for mortgage lenders and the limited availability of housing microfinance inhibit the growth of the housing finance market.
This note covers a broad overview of housing and housing finance markets in Tunisia. The Housing Finance in Africa Yearbook 2016 (7th Edition) was launched at the AUHF Conference and AGM, and this year it covers 51 countries and five regions across the continent. The full Tunisia profile was co-authored by CAHF and Ziad Sayah, and can be found here, while the profile for North Africa can be found here.
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Housing Finance in Africa Yearbook 2016 | A Country Overview of Housing Finance Markets in Tunisia
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 Tunisia has a reasonably well-developed financial sector, which is regulated by the Central Bank of Tunisia. Over the past four decades, a sophisticated mortgage-based housing finance system has developed. There are a large number of financial institutions offering loan products for housing, including over 20 private commercial banks, in addition to the three state-owned banks.
The de-compartmentalisation and deregulation of the banking sector have allowed new actors to strategically position themselves in this market.
While private lending is focused on high to middle income households, there have been savings-for-housing programmes for the formally employed since the 1970s. The Housing Bank is the exclusive manager of a state-subsidised housing loan for low income households called FOPROLOS. Loan rates for mortgages range from 2.5 to 5.75 percent for three different income eligibility brackets, targeted at households earning a regular salary at between minimum wage and up to 4.5 times minimum wage (set at US$ 152 a month - from May 2015 onwards). This compares to an average 7.78 percent rate for mortgages available at commercial rates, in July 2015.
According to the Central Bank, the total value of long-term loans to home-buyers increased by 8.3 percent between 2014 and 2015, reaching US$ 3.71 billion. Mortgage lending is approximately equivalent to 8.6 percent of GDP. Rules modified in 2007 limit loan-to-value ratios to below 80 percent (though up to 90 percent in social lending programmes, like FOPROLOS), and a maximum term of 25 years. Part of this law also requires long-term liquidity matching requirements for loans over 10 years and a requirement that interest rates must be fixed for housing loans longer than 15 years. This requirement means many banks are funded by sovereign bonds and are hesitant to offer loans beyond 15 years. Current challenges include a lack of liquidity and a high level of non-performing loans, which was reported to have increased from 12 percent in 2010 (pre-revolution) to 15.7 percent in 2015.
On 5 November 2011, the Government issued a Decree-Law on Micro-finance Institutions opening the way for new entrants. The government has set up a licensing authority with the assistance of the German Development Agency. This sector is likely to experience growth in the coming years, yet has been slow to launch due to political and regulatory uncertainty for new entrants. However, the additional untapped market has been estimated at between 0.7 and 1 million people.
The microfinance sector has yet to grow substantially due to restrictive regulation and interest-rate caps set before the Revolution. Only one institution, Enda Inter-Arabe, operates at any scale. At the end of 2013, Enda had 231 520 clients, and a gross loan portfolio of US$ 96 million, with a default rate of only 0.55 percent.
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 Tunisia ranks 75 out of 189 countries in terms of the ease of doing business according to Doing Business, similar to its 2015 ranking but still an all-time high, compared to its 2010 ranking of 40.
Contribution of the housing sector to GDP was estimated at US$2.8 billion in 2014, representing 6.6 percent of GDP. In the first quarter of 2016, the number of jobs in the construction and settlements sector represented 13.5 percent of total employment.
Despite a slowdown in the pace of new construction (as evidenced by a 6.5 percent decrease in the demand for cement in the first quarter of 2015) and as the outlook of capital markets and the banking sector remains uncertain, Tunisians continue to put their money in real estate as housing in Tunisia is still considered a secure and profitable form of investment.
Prices in the formal real estate market have been increasing at a rate of 8 percent per annum since 1990, and have continued to rise following the Revolution.
In 2010 the average price of a housing unit was US$36 180 at a size of 134 square metres, or US$270 per square metres. Meanwhile, the Global Property Guide reports that the average sale price for a house in Tunis can reach as high as US$2 100 – US$41 00 a square metre.
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Using C-GIDD (Canback Global Income Distribution) 2015 income data for Tunisia and 2016 CAHF survey input, we have explored housing affordability. The number of rural and urban households is illustrated per income bracket, defined below. Additionally, the graph provides the national average annual urban household income in 2015 (in constant 2005 US Dollars) and the average annual household income needed to afford the cheapest newly built house in 2016 (also calculated in constant 2005 US Dollars, for comparative purposes), built by a developer. This was calculated by CAHF and is a rough estimate, based on a number of assumptions.
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Due to progressive housing policies since independence in 1956, housing is more affordable in Tunisia compared to other countries in the region. Overall price-to-income index is often quoted as five, yet this number does not reflect the reality for low-income households, which is a growing market segment as youth unemployment remains high at 40 percent. These households usually cannot qualify for housing loans and do not have the capacity to pay for even a modest unit.
The graph below shows the affordability of market segments across urban areas in Tunisia, in terms of the potential book size (in 2005 constant US$) that might be achieved if each household in the band were to access the loan they could afford (and assuming that this loan could actually buy a housing product that was suitable for their needs). This is shown assuming a bond term of 15 years and an interest rate of 8 percent (based on current averages in Tunisia). It is estimated that 86.56 percent of urban households could afford the cheapest newly built house, formally built by a developer, priced in 2016 at US$ 25 405.
A 2012 analysis by UN HABITAT calculated that a house of 75 square metres built progressively on peri-urban land would cost about US$14 000, or US$187.5 per a square metre. Such a unit has a price-to-annual-income ratio close to nine for the lowest decile households. Assuming 30 percent of income could be mobilised for monthly housing payments, the repayments required on the cheapest housing loan makes this unit unaffordable to 30 percent of Tunisians households.
According to Brookings Institute, the size of Tunisia’s middle class reached more than 40 percent of the total population in 2010, up from 25 percent in 2000. Per capita spending averaged US$2 360 a year in 2010, which ranged from US$1 496 in the Centre West region to US$3 228 in Tunis. In 2012, 1.2 percent of households had expenditure of less than US$2 500 a month, 12.8 percent spent between US$2 500 - US$5 000, 24.9 percent between US$5 001 – US$7 500, 20.9 percent between US$7 501 – US$10 000 and 40.2 percent above US$10 000. In May 2015, the minimum monthly income for a 48-hour working week increased to US$ 152. Yet, this still leaves the lowest tier of formally employed people with only approximately US$ 40 – US$ 80 a month to spend on housing.
The government programme, FOPROLOS, was designed in 1977 to provide housing finance for low-income groups and is still the main tool assisting access to affordable housing.
However, in recent years, the cost of a FOPROLOS home has become inaccessible to the target groups, with housing costs at around US$510 a square metre. Qualifying criteria do not enable households with irregular incomes to participate. Furthermore, loan ceilings have not increased with cost of production, so it is difficult for developers to offer a housing supply to match the subsidised financial product. There are clear indicators that, in its current shape, this mechanism is not suited for the attainment of its set objectives, thus prompting a spill over of the demand into the informal sector. According to data from MEATDD, the share of approved FOPROLOS housing units offered by private developers only represented on average 6 percent of the total approved housing units between 2004 and 2013.
The 2014 census and housing survey, released in September 2015, recorded a total housing stock of 3 289 903 units, an increase of 789 103 units since the last census in 2004. This exceeds the number of households, which was recorded at 2 712 976 in 2014. 79.2 percent of Tunisians own their home and an estimated 17.7 percent of the units are vacant, which are usually high-cost units, purchased as secondary homes, luxury rental properties, or speculative investment properties.
Of the annual demand, estimated at 77 000 units per year, around 40 percent is built informally on an incremental basis on quasi-formally subdivided land—the land is bought and acquired through notary deed. A total of 42 587 building permits were issued in 2013. Of the formal units, approximately 80 percent are constructed by individual households.
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In 2014, the Ministry of Public Works, Housing and Settlements undertook a comprehensive review of its housing policy, particularly in terms of exploring public-private partnerships. Preliminary recommendations for a new National Housing Strategy were presented by the government in September 2014 and included revitalising the role of the Housing Land Agency in land provision.
The government of Tunisia launched a reflection on the overhaul of the FOPROLOS mechanism, which is widely regarded as obsolete, as part of the new Housing Strategy presented to the Prime Minister in October 2015. The upcoming reform will aim to increase affordable access to housing and should include an extension of the repayment terms. Additionally, the aim is to decrease the self-financing rate and also to revise the eligibility criteria. The strategy also provides for a new guarantee fund mechanism aimed at promoting access to housing finance, including through FOPROLOS, to modest households that are not affiliated to social security or do not hold a bank account. A removal of the de jure monopoly of the Housing Bank on subsidised FOPROLOS loans is also under consideration.
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Visit our Tunisia page to access blogs, documents and other useful publications on the housing finance system in Tunisia.
Key CAHF resources include:
- Housing Finance in Africa Yearbook 2016 – Each year, CAHF publishes its Housing Finance in Africa Yearbook. The 2016 edition has an up-to-date profile for Kenya and the East African Community.
- HOFINET Survey Tunisia – The Housing Information Network (HOFINET) survey for Tunisia covers general macro-economic data, and data on housing finance systems and housing policy. It is freely available to download.
- News on Housing and Housing Finance in Tunisia – CAHF maintains an up-to-date list of all relevant news on its website, covering Tunisia and all other African countries.
Other useful resources include:
- African Development Bank – The aim of the African Development Bank (AfDB) Group is to spur sustainable economic development and social progress in its regional member countries (RMCs), thus contributing to poverty reduction. In order to achieve this, the Bank mobilizes and allocates resources for investment in RMCs and provides policy advice and technical assistance to support development efforts.
- Central Bank of Tunisia – Provides up-to-data data, informations and statistics on the monetary policy and banking regulation and supervision.
- Doing Business – Doing Business is a World Bank publication on quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies over time.
- Making Finance Work for Africa – The Making Finance Work for Africa Partnership is an initiative to support the development of African financial sectors.
- Mix Market – A data hub where microfinance institutions (MFIs) and supporting organisations share institutional data to broaden transparency and market insight.
- World Bank – Provides data and research on a country basis.
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