Palatial property

The 1998 film Hideous Kinky starred Kate Winslet as a carefree young mother running wild in Morocco. For many viewers, however, the star of the movie may not have been the English actress but rather the streets and landscapes of the north African country. In particular, the camera often lingered over the charming houses, rambling souks, or markets, and higgledy-piggledy lanes of Marrakesh, perhaps the most famous of Moroccan cities.

In the 1960s, the city was far off the tourist trail. Instead it was a favoured haunt of hippies, drawn by the cheap lifestyle, laidback mystical vibes and a ready supply of marijuana. Famous visitors and residents included Allen Ginsberg, John Lennon, Mick Jagger, Jimi Hendrix and Yves Saint Laurent. Nowadays, with the advent of cheap flights, it is seen increasingly as a mainstream destination, just a short direct flight from Europe.

Marrakesh has long been the focal point of most European property investors looking to buy in Morocco - and for obvious reasons. Aesthetes can hardly fail to be won over by the city’s medieval-style layout and its historic riads, often clustered around cool little squares, sheltered from the hot African sun.

Second-home owners can furnish their abodes with fine carpets and ornate crafts from the city’s labyrinthine souks. Or they can spend their days exploring the medina, or old town, the gardens and the many back streets of the city - perhaps rounding off the day with a visit to one of its many hammams, or ancient steam rooms. Their aural backdrop is one of busy streets and the call to prayer from nearby mosques.

Marrakesh is still very popular but at the same time, many property buyers are venturing further to new, modern resorts on the edge of the city. There, many villas are large enough to have gardens and even swimming pools, and may have the snow-capped backdrop of the Atlas mountains - where there are skiing facilities. Buyers are also picking up properties along the Morocco coastline in places like Agadir, and in other inland cities such as Fez.

The trend is part of a wider move by western European investors to put their money in overseas property, known colloquially as ”fly-to-let”. Yolande Barnes, head of residential research at Savills, the upmarket UK estate agents, says: ”Increasingly, UK purchasers are looking further afield, from traditional western European destinations to the likes of Bulgaria, Morocco and the United Arab Emirates (UAE).”

”Investor interest now has shifted from refurbished or renovated older riad properties towards the new developments of residential apartment and villa complexes,” according to a report by Hamptons, another UK estate agent. ”Simultaneously, it has also expanded beyond Marrakesh to beach resorts.”

In part, this is down to a concerted effort by the national government to expand its tourism capacity - in particular along the coast. With tourism having already become the country’s biggest source of foreign exchange reserves, the government is implementing its ”Plan Azur” to allow more low-cost airlines to offer flights to Morocco, which is nearer to London than the Canary Islands. This will involve the construction of new regional airports and the introduction of an ”open skies” policy for airlines.

Ministers are also carrying out a programme called Vision 2010. This is a specific attempt to increase the number of visitors to Morocco to 10m a year by the end of the decade, with the creation of six new seaside resorts. Running from north to south, these are: Saidia Mediterrania, near Tangiers, with 30,000 beds; Lixus, with 12,000 beds; Mazagan, with 8,000 beds; Mogador with 10,500; Taghazout with 25,000; and Plage Blanche with 26,000. There is also a drive to increase the number of resorts in towns such as Agadir and Fez, taking the total target of new beds up to 160,000.

Clearly, this means a lot of building and many visitors to Morocco are quick to notice the amount of construction going on around the country. This is partly due to government tax incentives for companies to build low-cost housing, with more than 100,000 being built every year. But it also reflects a surge of new holiday homes. It is possible that the rush to put up tens of thousands of new villas and flats aimed at foreign investors may saturate the market. But there are few signs yet of any over-supply.

With interest rising, prices are reported to have jumped by about 50 per cent in the past two years, according to local estate agents. Hamptons, for example, says that a small riad in the medina of Asilah, a small town just south of Tangiers, that sold eight months ago for $775 (£390, E575) per square metre and could now sell for an estimated $1,330 (£668, E985) per square metre.

”Prices are going up,” says Naomi Greatbanks, head of the international residential network of associates for Savills. ”Everyone thinks it is going to be very cheap but it no longer is.” The agency has been selling 40 luxury villas close to the new Mandarin Oriental Hotel in Marrakesh at prices of E4m to E6m.

Yet with prices still about a third of those in European countries such as Spain and France, rental yields on some properties are said to have remained relatively high. The country’s 300 days of sunshine per year mean that lettings are less seasonal than some European resorts.

Footballers, actors and other wealthy celebrities are increasingly drawn to Morocco. Famous home-owners in the country include Sir Richard Branson and Sir Mick Jagger.

And several prominent developers from outside Morocco are moving in. For example, Sir Rocco Forte, the UK hotelier, is poised to put the Rocco into Morocco with plans to operate a hotel which will be part of a new golf resort in Marrakesh. Rocco Forte Hotels, the entrepreneur’s privately owned company, will run the hotel at the new Assoufid resort, which is being developed by a consortium of property investors. The complex, Morocco’s first private members’ estate, will have an 18-hole golf course and 80 residential villas for sale amid 225 acres of land.

Other developers moving into the country include Qatari Diar, the state-owned developer that is rapidly expanding its property portfolio around the world and investing heavily in a new development near Tangiers (see opposite).

Emaar, the Dubai-based developer, has plans to build three developments with an investment value of £2.75bn. Wafaa Snibla, the company’s general manager in Morocco, says the country is one of the group’s biggest markets outside the UAE: ”It has a distinct natural beauty, a beautiful climate and is becoming an increasingly sought-after destination for home-buyers.” Emaar’s three projects are Tinja, 20 minutes outside of Tangiers, Oukaimeden, in the Atlas mountains, and Saphira, on the western edge of Rabat.

The projects are competitively priced compared to Europe, says Mr Snibla, though not always cheaper. For example, homes at Tinja will be priced at E1,000 to E1,500 per square metre. This is less than Marbella in Spain or the Algarve in Portugal, both at E3,000 to E3,500 per square metre, but more than Bodrum in Turkey or Hammamet in Tunisia, at E750 to 1,000 per square metre and E900 to E1,200 per square metre respectively.

Capital gains tax is, however, as little as 0-20 per cent and landlords pay no rental tax for the first three to five years. Morocco has a notary supervised property registration system - similar to France and Spain.

Still, investors in Moroccan property should be wary and make sure they have done their homework with regard to legal rights, tax status and so on before making a purchase. Furthermore, talk of expected capital growth should be put in perspective - prices are cheaper than mainland Europe because Morocco is still a very poor country. Also, in March and April, several suicide bombings were carried out in Casablanca targeting western interests.

Despite these concerns, estate agents are calling the country one of the new ”star” emerging markets along with Cape Verde and Brazil.