Oxford Business Group
In just five years, real estate development surpassed the total of the previous 15 years, transforming the once peripheral real estate market into one of the region’s best-performing sectors. However the growth has come at a cost.
New investments disproportionately favour high-end residential and commercial properties offering the highest returns and have exacerbated the pre-existing shortage of affordable housing.
Rent for up-market units, for example, more than doubled in just four years to between K5,500 and K8,000 a week.
This has led to a migration into shanty towns and informal housing settlements across the country, and rocketing construction costs have further eroded investor interest in the low-cost segment.
According to LJ Hooker Real Estate, one-third of Port Moresby’s population, including almost 50% of the middle-class work-force, is affected by housing shortages.
This means there is further potential for growth, particularly in the lower and middle-class real estate segments.
A widely anticipated reduction in construction costs post-2014 may help realise the sector’s potential, with assistance from both public and private sectors.
The fledgling Office of Urbanisation’s ambitious blueprints to provide affordable housing nationwide could provide the necessary catalyst for change.
Some 27 cities and urban centres, including five designated “mega-cities”, with projected populations of over one million people (Port Moresby, Lae, Wewak, Tari and Kokopo), have been earmarked for urban renewal and expansion under the National Urbanisation Policy 2010-30.
Two affordable housing pilot developments are already underway in Torama Valley, Port Moresby, and the Goroka Valley.
As PNG’s real estate market faces an inevitable price correction in the coming years, the availability of more affordable housing for the lower and middle-income segments should increase.