Property ownership a high priority for many PNG citizens


With demand for high-end residential rentals declining significantly over the past year, the affordable housing segment is a bright spot in Papua New Guinea’s real estate sector and holds high potential for development, particularly in Port Moresby.

Recent surveys have revealed considerable pent-up demand for property ownership in the country, with affordable housing purchases expected to keep the industry on a steady growth path despite the ongoing downturn. Limited availability of land still poses a challenge, as do relatively high construction costs, and low-income earners continue to be priced out of the segment. However, recent government efforts to expand home ownership under low-cost lending schemes and construction of new affordable housing should help alleviate the situation over the medium term. Incentives aimed at reducing construction and import costs could also see more private developers enter the affordable housing arena, with several already actively expanding their portfolio of affordable units on offer.

Demand Rising 

In May 2017 online real estate portal Hausples released a survey examining real estate demand in PNG, with questions divided between rental and sales markets, financing and general real estate industry sentiment.

The survey found that buying a property has become a high priority for Papua New Guineans, with 55% of respondents planning to purchase a home over the next 12 months. In another promising development, the survey found that 61% of respondents believe that now is a good time to buy a home, even as 67% of respondents reported believing that property prices have increased over the past 12 months. More than 80% of respondents reported that they would prefer to buy in or around the capital, followed by Lae, East New Britain and Madang.

Unlike rental tenants, potential home-buyers expressed a preference for PNG- and Western-style houses, at 30% and 28%, respectively, while just 7% planned to purchase a condominium.

Although the survey reports that purchasing power and financial literacy are rapidly improving, affordability remains an option, and 70% of respondents reported that they intend to spend less than PGK500,000 ($159,000) on their next home.

A further 20% will spend between PGK500,000 ($159,000) and PGK1m ($317,000), and 10% of respondents plan to spend more than PGK1m ($317,000) on a property purchase. Hausples reports that 85% of respondents said they planned to contribute a deposit of 10% or more towards their home purchase, while 77% reported they will purchase home insurance, demonstrating that financial literacy is also improving across the country.

Cost Constraints 

Although the survey results are promising and reveal pent-up demand for home ownership in the PNG market, affordability remains a critical issue. In a separate survey conducted by consultancy Niugini Land and Property, published in November 2016, respondents reported that urban population growth in Port Moresby has pushed property prices to unaffordable levels, with survey respondents reporting that the budget for many prospective home buyers is approximately PGK200,000 ($63,400), roughly half the average cost of land and a home in the current market.

Lindsay Kutan, managing director of Niugini Land and Property, told local media in November 2016 that construction and development costs are high, particularly in popular areas such as the Skyview Estate at Seven Mile, reporting that building material imports, skilled labour, construction of trunk infrastructure including roads and utilities, and access to state-leased land are all expensive in PNG.

The PNG National Research Institute (NRI), meanwhile, reports that one of the lowest prices for a house in Port Moresby was PGK292,800 ($92,800) in 2016, at the EDAI Town affordable housing project, while the monthly salary for an average low-income earner in Port Moresby is PGK1400 ($444).

The Niugini Land and Property survey also found that timber detached PNG-style houses were the most-preferred among respondents, though the starting price for this type of property averages between PGK500,000 ($159,000) and PGK800,000 ($254,000), depending on location and size. Port Moresby is the preferred location for a property purchase, followed by Kokopo, Rabaul and Lae, with Boroko, Korobosea and Five Mile the most popular Port Moresby suburbs for prospective home buyers.

Land & Finance 

Both the Hausples and Niugini surveys found that availability of land is one of the biggest impediments to home ownership in the country. An estimated 97% of land in PNG is held under customary title, with the remaining 3% split between state-owned and freehold. Local media reported in May 2016 that just 30,000 ha of land in the country is classified as freehold.

Although the government has been seeking to implement land reforms that would enable the development of customary land for housing and commercial schemes for decades, land remains in critically short supply in Port Moresby, Lae and other urban centres, while the recent cancellation of the special agriculture and business lease scheme has raised doubts about future supply. Nonetheless, the government and some private developers have made strides in increasing the availability of home finance and affordable properties in recent years.

National Housing Corporation 

Development of affordable housing has been a priority for the government since 1968, when it established the National Housing Corporation (NHC) to build lowcost housing for government workers. The National Housing Estate, an NHC subsidiary, was launched in 2011 with a mandate to build houses in Port Moresby and other cities in PNG, with the estate launching a new social project at the Duran Farm Housing Development in 2014. Under the Affordable Land and Housing Programme, the Office of Urbanisation also launched the Gerehu 3B housing project in 2015.

These projects are expected to add a cumulative 40,000 fully serviced land allotments for PNG citizens over the next five years, with government workers set to be the primary beneficiaries. However, in a November 2016 report titled “PNG’s Drive to Provide Affordable Housing: Are We Ready?”, the NRI reported that to date, very little is known about these schemes’ progress or implementation.

In 2015 the government also launched a housing programme aimed at government workers, which involves the state government allocating PGK1m ($317,000) to each district administrator, an allocation matched by provincial governors in collaboration with members of parliament. The money will be used to build 10 houses in each of PNG’s 89 districts.

More recently the NHC launched a new affordable housing project near Eight Mile, just outside Port Moresby, in October 2016, which aims to deliver 5000 new houses by 2017, and a total of 44,000 new homes by 2020, with prices set at between PGK350,000 ($111,000) and PGK450,000 ($143,000) for three- and five-bedroom houses, respectively.

New To The Market 

The government is also moving to expand access to home financing, making a PGK200m ($63.4m) allocation to launch the First Home Ownership Scheme (FHOS) in 2013 in partnership with Bank South Pacific (BSP), which manages the programme. FHOS loans are intended to provide PNG citizens with the opportunity to buy a home of their choice. Eligibility criteria stipulate that the purchaser must be a first-time buyer, provide a 10% down payment and be a salaried employee.

Applicants must submit a copy of a title deed confirming land ownership to receive a development loan. Loan values are at least PGK250,000 ($79,300) and capped at PGK450,000 ($143,000), with a 4% interest rate and a 40-year repayment period. This lowers fortnightly mortgage payments from around PGK1425 ($452) under a standard home loan with an 8% interest rate, 25-year tenor and 20% down payment to PGK771 ($244). The scheme has been successful, and in late 2016 BSP reported its total FHOS portfolio was valued at PGK160m ($50.7m).

The scheme has faced some criticism, with Kutan telling media that while it is a good policy initiative, binding constraints on the supply side continue to challenge affordable housing development. He called on the government to increase the stock of land with secure titles and encourage tax incentives for property developers, particularly a reduction of import and stamp duties, which would also significantly reduce construction and housing costs.

Private Affordable Development 

Recognising the rising demand for affordable property, several private companies have invested in the segment in recent years. “Real estate stock for middle-class housing is missing,” Torquil Bowen, CEO of Credit Corporation, told OBG. “If it is brought up to speed the mortgage market would naturally improve.”

EDAI Town began development in late 2013 under the JC-KRTA Consulting Group. Located 20 km outside Port Moresby, the project benefits from land held under a 99-year state lease. Four types of housing are on offer: traditional four-bedroom houses, modern two-storey four-bedroom houses, two-storey three-bedroom duplexes and two-storey three-bedroom townhouses. Home prices range from PGK268,000 ($85,000) to PGK790,000 ($250,000), with Century 21 Siule reporting that 85 families were living in the development as of April 2017.

Established in 2008, the Glory Group of Companies has also been active in affordable housing projects. Its portfolio includes residential properties in Ela Vista at Ela Beach, Glory Garden and Skyview. The group has developed more than 500 houses targeting middle- and high-income householders, as well as corporate clients, with prices ranging from PGK500,000 ($159,000) to PGK1.2m ($380,000).

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