Hargeisa, Somaliland, presents a fascinating paradox in its real estate market. Land and property prices have soared, fueled by several factors. However, this seemingly positive development masks a concerning reality: low market activity and a potential economic crisis.
Factors Driving High Prices:
Limited Supply: Hargeisa, like many developing cities, faces a shortage of available land, especially in desirable locations. This scarcity naturally pushes prices upwards.
Diaspora Investment: Many Somalilanders living abroad, particularly those who have done well financially, are investing in their homeland. This influx of cash creates high demand, further inflating prices.
Speculation: With the perception of a constantly rising market, some buy land simply to hold and resell later at an even higher price. This speculative behavior can further distort market value.
The Looming Crisis:
Despite these seemingly positive factors, the high prices create a significant hurdle:
Low Liquidity: Many average citizens cannot afford these inflated prices, leaving a significant portion of the market frozen. While land may be valuable on paper, its illiquidity hinders its ability to translate into economic growth.
Remittance Decline: With a decrease in the number of remittances coming into the country, the pool of potential buyers shrinks further. This can lead to a situation where even those who might have considered buying are priced out.
Lack of Regulations: The absence of clear regulations and the presence of “pirate brokers” who undercut legitimate sales further disrupt the market, making it less transparent and secure for investors.
The Potential Impact:
The current situation presents a real risk of a bursting bubble. If land prices become unsustainable and the market remains stagnant, it can trigger a domino effect:
Economic Stagnation: Without a functioning real estate market, investment and development can grind to a halt, hindering overall economic growth.
Social Unrest: If average citizens are permanently priced out of owning land, it can lead to frustration and social unrest.
Addressing this situation requires a multi-pronged approach:
Increase Supply: Developing more land, particularly on the outskirts of the city, can help increase supply and alleviate pressure on prices.Invest in Infrastructure: Expanding essential services like water and electricity to outlying areas can incentivize development and create new attractive locations.
Regulatory Framework: Implementing clear and transparent regulations for the real estate market can build trust and attract legitimate investors.
Mubarak Maal
Communication Strategy Specialist
