· Ethio Real Estate
How Birr Liberalization Will Transform Ethiopian Real Estate
Topics:Market
Summary of the Ethio Real Estate report
The liberalization of the Ethiopian birr has been the talk of the town in recent days, with widespread expectations that its impact on the economy will be profound. A key area of interest is how this will affect the real estate market in Ethiopia. In short, we expect a mixed bag of impacts.
Key points
- The liberalization of the birr is expected to have a profound effect on the economy.
- The authors expect a mixed set of impacts on the real estate market.
Real.et analysis
Ethio Real Estate writes about the liberalization of the birr in July 2024, which it says was the main topic of conversation in Addis Ababa at the time. The authors expect a large effect on the economy. For the property market, they expect a mixed set of impacts, with some groups gaining and others losing.
What this means for buyers, sellers and landlords
A floating birr changes the math for each group in a different way.
- Diaspora buyers. Each dollar now buys more birr at the official rate. If developers do not raise birr prices at once, homes look cheaper to buyers with foreign income.
- Local buyers. Wages in birr may not keep up with rising prices. Homes may move further out of reach for buyers who save in birr.
- Developers. Imported inputs cost more. New launches will likely come at higher prices, and some projects may pause.
- Landlords. Rents may rise with inflation. Landlords who price rent in dollars may find tenants harder to find, since many tenants earn birr.
- Sellers. A seller who needs dollars may now get a fair price through formal channels instead of the parallel market.
The net effect on prices is hard to predict. It depends on inflation, interest rates and how much diaspora money comes in.
Background
The National Bank of Ethiopia announced the move to a market-based exchange rate on 29 July 2024, under a reform program supported by the IMF. In the months that followed, the birr lost more than half of its value against the US dollar. Our house prices in Addis Ababa guide shows where prices stand now. Diaspora buyers should also read buying property in Ethiopia as a foreigner.