Contributed by our consultant on the ground in Luanda – Inyene Udoyen
As we all know the price of oil has gone down dramatically over the last year and our clients have expressed interest in the effect this is having on the expat rental market in Angola focussing on the following questions:
Has the demand gone down and is there currently a surplus of available properties and, if so, how has this affected the rental price?
For those expats that are in rented accommodation already; when it comes to renewals of leases, is there an opportunity there to negotiate a lower rent before renewing the contract?
Clients are expecting the rental costs to go down when the demand is not as high as it once was; is this happening or not?
Rental prices have come down and there will be a fair amount of availability soon. This month we are seeing a lot of changes in the volume of expat rentals. Many companies have either shut down completely or have cut the amount of staff drastically to cut costs. In the city prices have been coming down over the past year or so and this has sparked a lot of movement with many either renegotiating their contracts or moving to better quality accommodation for the same budget. Several major changes have affected the market:
• Introduction of 15% urban property tax (IPU) 2 years ago and consequent enforcement in companies with organized accounting meant landlords tended to put 15% on top of their original asking price.
• Recent law to limit advance payments to between 2-6 months.
• Recent law that all payment should be made in kwanzas and now only non-residents can quote in dollars in contracts.
• Recent banking restrictions locally mean that it is very hard to get dollars out of the bank even if one has deposits.
• Large gap between official exchange rate ($1:160) and actual rate at which forex can be bought ($1:300+ at bureau de change).
I mention these issues because they have affected what would be a basic drop in prices by muddying the waters somewhat. So although prices have gone down in global terms the asking prices have been affected by these issues and vary greatly. First of all for international clients who can still pay in USD outside the country we can definitely negotiate very good rates as everyone prefers this option. Payment locally in USD now does not hold as much appeal as previously as having the money in your account does not mean you can easily access it. A lot of rentals are still quoted in dollars at the official exchange rate to act as a basic hedge against the devaluing kwanza. Now there is a move to use only kwanzas but the landlords still think in dollars and not knowing where the kwanza will end up they have to take a guess and are mostly using rates somewhere between the official and reality.
Still overall rental rates are definitely down and most of our clients are renegotiating their contracts downwards and Sonangol (Sonangol is a parastatal that oversees petroleum and natural gas production in Angola. The company is responsible for the management of oil and gas reserves in Angola) has cut costs as well which means they may not approve higher costs as readily as before. This year they hope to gradually move to only referencing kwanza with no mention of dollars. Right now there is lot of activity as many companies are consolidating accommodations to save on other costs such as security and transport i.e putting all their staff in one building or complex. A lot of clients that are kwanza-rich and are here for the long-term are buying their properties rather than renting because prices are lower, people are desperate and it’s better than having the money devalue in the bank. Locals are also buying property for this very same reason.
We are also doing a lot of basic factoring now for our clients who can still pay outside the country which allows them to get a lot more out of their contracts e.g for the same price in dollars we pay the rent locally but can include whatever services they need, usually TV/internet, maid, furnishing…etc.
There is still not a surplus of new apartments in the city centre for now, but this is because there are 5-7 new buildings not on the market yet. Once these come online there will definitely be a surplus of apartments in new buildings in the city which should bring the prices down, however, given current trends their are likely to spark more consolidation with companies taking the advantage of putting their staff in new buildings to save the inherent maintenance and security costs associated with older buildings. In fact they are only empty because the owners have taken loans to build them and are angling to sell/rent them in their entirety to one entity, which until last year was a great and viable business model.
Talatona also has a reasonable amount of properties available right now and prices have come down considerably but it is still not the ghost town people expect as many have taken advantage of this dip to move in there from further out and some companies to consolidate their operations and staff dispersement around Talatona instead of the city or further out.
So to summarize:
Prices have come down about 20%.
Kwanza has devalued 16% since 1 January and is set to devalue more.
If you can pay in USD outside then prices have actually come down somewhere in the region of 40+%.
Landlords are now accepting 2-6 months payment frequency.