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Published On: Sat, Dec 6th, 2014

Property in Somaliland, Puntland and Somalia – After Oil is Found

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So the year is 20XY (yes the XY is deliberate) and oil is finally found in Somalia, Somaliland and Puntland.

What happens next?

Well it’s hard to predict exactly what will happen next if oil is found, but we can predict the likely outcomes by taking a look at what has happened to similar dessert like countries who became blessed with the black gold called oil.

The changes that we can expect to see Insha’Allah (God willing) are many, but we will look at the property market before and after oil is found.

We will also discuss what the visionaries (people who see an opportunity of a lifetime at home) are doing right now just in case this decades-old Somali dream comes true. We shall discuss who will make money directly and indirectly and how you can get a piece of the pie.

Expatriate Influx:

If oil was found and production starts tomorrow, the Somali regions (Somaliland, Somalia, Puntland, etc.) will require technical, professional and administrative personnel to exploit our oil reserves. The oil production will need infrastructure and development to be able to efficiently produce gas.

The Somali regions will have to turn to foreign expertise to be able to exploit its natural resources, which means influx of people.

The expats required for this will not be in the thousands or even in the hundreds of thousands. The magnitude of foreign influx of expatriates could be similar to the one experienced by similar oil producing countries in the region like Saudi Arabia, Kuwait and UAE.xxxxx

Saudi Arabia was one of the poorest countries until it found oil in the late 1930s. By the 1980s their population has doubled and by 2013 the foreign expats made up a third of the population. The Gulf Cooperation Council (GCC) countries and the percentage of their population that are expats are shown below [1]:

In Kuwait and Bahrain, foreigners make up more than halve the population. In Qatar and the
United Arab Emirates, the expats made up 85% and 87% of the population in 2013 respectively. That means in the UAE only 1 in every 10 people are nationals almost, and the rest are foreigners.

Once oil is discovered in the Somali regions, it’s not just foreigners that will show up, so will the Somali people living abroad or in other Somali regions (regions that were originally part of Somalia), and they are not a few thousand. Look at the number of Somali people living outside Somalia, Somaliland and Puntland, who could potentially show up:

 

Country Number of Somalis Ref.
Ethiopia:                4,600,000 [3]
Kenya:                2,400,000 [4]
Djibouti: 464,600 [5]
Yemen: 200,000 [6]
Canada: 150,000 [7]
United Kingdom: 108,000 [8]
United States: 85,700 [9]
Sweden: 54,221 [10]
United Arab Emirates: 50,000 [11]
South Africa: 40,000 [12]
Netherlands: 37,432 [13]
Norway: 36,651 [14]
Saudi Arabia: 20,000 [15]
Denmark: 18,645 [16]
Finland: 15,789 [17]
Australia: 9,914 [18]
Italy: 8,112 [19]
New Zealand: 1,617 [20]

 

 

The numbers also don’t cover all the people who were born abroad or are mixed race. The list also doesn’t cover people who are staying in foreign countries illegally or came in with passports or documents from another country.

So we are looking at Somali people who potentially could come back to their ancestral land in the Millions if oil is found and the going becomes great.

So what does this mean?

Well, this massive increase of skilled and labour workers in Somalia, Somaliland and Puntland will need a place to stay, which can only mean one thing, a housing shortage followed by a property boom.

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Rental Property Shortage:

As you can understand, an influx of skilled and labour workers in the Somali regions will require a place to stay.

Most oil companies will have to find accommodation for their key personal, but the labour market will have to fend for themselves and find places to rent. The demand for a place to stay will outweigh the supply of rental properties, which can only mean one thing; increase in rental property prices. Once the limited number of rental homes that belong to the Somali diaspora (Somalis living in Middle East, Europe and North America, etc.) are all rented out, the land lords will just increase the prices and there will be takers.

This phenomenon is nothing new; similar rental properties booms have happened in most oil producing countries in the region.

In 2007, the average monthly rent for a 3 bedroom house in Riyadh, Saudi Arabia was around US$3,400, a 65% rise from a year earlier, based on the cost of living survey of UN International Civil Service Commission [2]. Considering that the oil boom started in the 1930s, property prices increased that much in 2007.

The usual home, land and rent in cities like Hargeisa, Burco, Bosaso and Mogadishu could easily quadruple and fetch the prices that are expected in countries with new found riches.uuuuu

In Hargeisa and Burco at the moment (2014) a decent family home of 4 bedrooms can be rented for about US$250 to $400 per month, the summer months normally fetching prices a bit higher for fully furnished homes.

At the moment, there are not enough rental properties available since most local people don’t rent generally in the Somali regions (which also applies to most Arab countries), so a small increase in foreigners can send rental prices skywards very quickly. This rental boom will be good news for people who own multiple properties in areas that will house the skilled and labour workers.

The oil companies will provide rental properties for their key personal similar to the current Non-Government Organizations (NGOs) in the Somali regions. This is mostly because it doesn’t make financial sense to build homes for workers in a project with uncertainties (project duration, work force, stability of region, etc.). The skilled workers who don’t come with the oil and infrastructure related companies and the labour workers will have to fend for themselves and find their own accommodation similar to other oil producing countries.

Another factor that could potentially drive rent prices even higher is that most rental properties currently are owned by the Somalis living abroad, so once a large portion of them come back, there will be less homes available to be rented as expected. Most families living abroad have some properties that are currently occupied by family and relatives or are being rented out.

What will this demand in rental properties do to land prices potentially you ask?

Read on.

Property Prices Surge:

To meet the property needs, homes will have to be built by the hundreds of thousands very quickly, a rate which small local builders can’t achieve currently. Foreign international construction companies will most likely step in and build homes along with the required oil production facilities, roads etc. This magnitude of new homes being built will then cause land prices to increase sharply.

The average 4 bedroom homes that currently sell for about US$50,000 in Somaliland and Somalia could potentially go for $150,000 in the regions that the oil is found very quickly. Anyone with plenty of property aside from what he/she is residing in will make some serious coin.

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We will most likely also see the construction of high end properties in the most sought after areas in the Somali regions. Although there are high end-ish homes and estates in Hargeisa and Mogadishu, we still have not seen homes fetching for $1,000,000 to $10,000,000 being built, but they can become a reality if oil is found. When there are enough petrol dollars to go around, be certain that we will see the day when this becomes common.

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Let’s not forget investors who will show up, grabbing properties, developing it and then selling it on for profit or holding onto it for the long run. When there is peace, security and stability in a country, if property values start to move fast, know that foreign investor will come in fast and thick.

The petrol dollars will Insha’Allah create a well off Somali middle class and high number of wealthy individuals from petrol directly or from the industries that will pick up with it.

 

Who Will Make Money?

The production of petrol will sure increase other sectors including real estate, construction, transportation, food and import/export. Somebody has to build infrastructure like plants and roads. Somebody has to transport all the goods to and from our ports (and Alhamdulillah we have the 2nd longest coastline in Africa). Somebody has to build homes for the millions of people moving in, and somebody has to provide them food. Somebody has to build and run hotels to accommodate short term stays and for people who can’t find rental properties in time.

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This increasing middle class will also need services that somebody has to provide. The people and companies running these necessary industries that go along with oil production will surely become wealthy in the Somali regions as they have in oil producing countries in the Middle East.

So how could you get a part in the action?

Well, let’s be honest, unless you have a few extra billion dollars to be a player in the oil exploration like our Somali brother in London, then you need to get into the industries that supplement it. If you were to become a player in the food industry and grow or import food to feed the millions of people that will potentially show up overnight, then you stand a chance to make some wealth. You could also get yourself a transportation and logistics company and move goods from A to B. Somebody will have to cater to the new money who will have appetite for luxury cars, clothing and accessories, and that could be YOU.

To have a fighting chance in whatever sector you choose to become a player, you would need to be prepared ahead of time. You will need to have intimate knowledge and experience in the field and cash (liquid assets) in hand to execute your project plan. Like they say, success rewards preparation (Insha’Allah)

What can the average Somali person do?

Buy and own property of course. Whether or not oil is found in the Somali regions, property values have been increasing, making anyone who owns land wealthier.

Fastest Growing City in the World:

At the moment, before oil has been found in the Somali regions, Mogadishu is already the fasting growing city in the world from new estimates from the United Nations [21]. Other cities in Somalia, Somaliland and Puntland are also increasing at an alarming rate, so property values have one way to go; UP. I am sure you agree.

 

Somestate for Properties:

Here at Somestate, we assist people looking to buy or sell or property in Somaliland, Somalia and Puntland.

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If you are looking to invest in a property in Hargeisa Somaliland, we currently have plots of land with great value. These plots of land are about 10 minutes from the city, located in the directions that the city is growing, so they will increase in value for you. By investing in land now, you can sell it for a profit later or build the type of home you desire when the time is right for you.

You don’t have to travel to back home, leave work, family or other commitments to be able to buy a property right now, simply contact Somestate by phone or by email and have a chat with us. We will explain to you the simple steps you would need to follow to buy land from us. The properties we are selling belong to us and we can produce all the government issued owners documents and witnesses (markhaati), so it’s a safe investment.

We are currently located in Sheffield England and in Hargeisa Somaliland, and we are serving buyers from around the world.

Free Advertisement @ Somestate:

You can also advertise your property on Somestate, free of charge. We are ranked #1 in Google for most real estate searches online in Somaliland and Somalia, so we have online presence. You simply create an account with your email and upload your property description, pictures, and your details and way you go.

www.Somestate.com

You set your price and you negotiate sale price or rental rates for your properties and people contact you directly. Anyone with a computer or a phone connected to the internet can view your properties. If you have any problems in signing in or creating an online account, then simply call or email us (our details shown below).

 

Short Conclusion:

When all is said and done, only Allah (God) knows if there is Oil in the Somali regions and if we will be around to see it. Insha’Allah we will find oil if it’s good for us, then we will go back home in the millions and become wealthy in our own backyard. I really hope that the oil exploration companies and their subsidiaries will be majority Somali owned and Somali run, and all the properties that will increase in value will belong to us.

We are ONE, the Muslims are ONE.

If you have enjoyed this article, make sure to read our other articles at:

www.somestate.com/blog

Like our Facebook page: facebook/SomestateProperties

Salam Allaikum.

Written by Faysal Ahmed of Somestate.

Faysal Ahmed, B.Eng., Masc.
Somestate Team
Email:faysal@somestate.com
Mobile: 44-(0)-750-730-1819 (England)

References:
1. http://www.bqdoha.com/2014/02/population-saudi-arabia-30-million-2013
2. http://www.globalpropertyguide.com/Middle-East/Saudi-Arabia/Price-History-Archive/Oil-fuels-Saudi-real-estate-market-boom-1160
3. CIA World Factbook: Somalia, people and Map of the Somalia Ethnic groups (CIA according de Perry-Castañeda Library Map Collection). The first gives 15% non-Somalis and the second 6%. Used 85% of current population of Somalia.
4. Central Statistical Agency of Ethiopia, “Census 2007″, first draft, Table 5.
5. “2009 POPULATION & HOUSING CENSUS RESULTS”. Ministry of State for Planning, National Development and Vision 2030. Retrieved 17 September 2014.
6. CIA World Factbook – Djibouti – People and Society; *N.B. ~60% of 774,389 total pop.
7. Shire, Saad A. Transactions with Homeland: Remittance. Bildhaan.: *N.B. Somali migrant population, Middle East including Yemen.
8. “Ontario Municipal Election: Somali Canadian Prospective”. Hiiraan Online. 10 November 2006. Retrieved 8 July 2013.; *N.B. 44,995 individuals reported Somali ethnicity in 2011 National Household Survey – c.f. [1]
9. “Estimated population resident in the United Kingdom, by foreign country of birth, April 2009 to March 2010 (Table 1.3)”. Office for National Statistics. Retrieved 30 December 2010.Figure given is the central estimate. See the source for 95 percent confidence intervals.
10. Survey: Nearly 1 in 3 US Somalis live in Minnesota
11. Statistics Sweden
12. Dubai’s Somali diaspora hope for change
13. Jinnah, Zaheera. “Making Home in a Hostile Land: Understanding Somali Identity, Integration, Livelihood and Risks in Johannesburg”. J Sociology Soc Anth, 1 (1-2): 91-99 (2010). KRE Publishers. Retrieved 6 March 2014.
14. Statistics Netherlands
15. Statistics Norway
16. StatBank Denmark
17. IOM – Finland
18. Australian Bureau of Statistics
19. Official demographic statistics in Italy – ISTAT
20. Statistics New Zealand
21. http://latimesblogs.latimes.com/world_now/2012/04/hold-urban-growth.html

 

 

 

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