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ISSUES PAPER May 2015 Issues Paper # 14 Belden Endekra, Flora Kwapena and Charles Yala Understanding Property Price [email protected]; Movements in Port Moresby: [email protected]; and [email protected] Lessons from a Price Tracking Experiment 1. Introduction Port Moresby has witnessed a properties boom in the last five or so years. Commentators attribute the construction phase of the $US17 billion PNG LNG Project as being the driver for the increased level of activity in the properties market. While the stock of properties at the high end has increased markedly, the same cannot be said of the middle to the lower end of the housing market spectrum. This gap has attracted the attention of public debate. In response, the government has initiated several policy initiatives, including the recently announced K200 million First Home Buyers Scheme, in partnership with the Bank of South Pacific Ltd and the Land and Affordable Housing Policy. In the absence of an established database, much of the debate and policy intervention is driven by anecdotal evidence. This paper attempts to fill this void. The paper draws on data from an experiment to create a database for tracking property prices using advertised data from the daily newspapers. This is aimed at providing details on the dynamics that drive the properties market, focusing on Port Moresby, which is indeed the largest market in the country. The data used in this analysis was generated using advertised prices of properties from The National, one of the dailies, on a monthly basis. The data gathered cover a one-year period, from July 2012 to July 2013 and is desegregated into two streams — location (suburbs) and time (month), for the analysis. Hence, the analysis is restricted to residential properties: standalone, units/apartments, town houses, and land, within Port Moresby, over the 12-month period for both sales and leases. The main findings of the study are as follows: First, sales prices for properties across all residential property types have been volatile but remain on a rising trend during the study period. Rental prices appear to have stabilised, having shown evidence of The National Research Institute high volatility during the first part of the study period. Second, and perhaps more P. O. Box 5854 Boroko, NCD Papua New Guinea importantly, apartments, town houses, and hotels are replacing standalone houses in Tel: (675) 326 0300/326 0061 locations zoned for residential (standalone houses) purposes. Further, properties 70311044/70311045 developed within the unplanned segments (referred to here as informal develop- Fax: (675) 326 0213 ments) of the Port Moresby property market are being advertised, especially for Email: [email protected] rental purposes. Website: www.nri.org.pg NATIONAL RESEARCH INSTITUTE ISSUES PAPER This has significant policy implications on the nexus between planning, development and records manage- ment. Here, planning and approval processes are lagging actual development. Third, apartments and units are being marketed as a complete set rather than individual units. This is reflective of the absence of appropriate institutions for facilitating transactions on individual units such as strata titling laws. Fourth, suburbs which were traditionally classified as low cost have registered rising prices in the absence of development in complementary infrastructure and services. The rise in value, therefore, appears to be demand driven rather than the intrinsic value based on access to basic infrastructure and services. This implies that residents are deprived of access to basic services, utilities, and shops. State intervention through structural reforms into the planning, development and administration of land titles is required to correct this anomaly, which is currently leaving many residents without basic amenities. The three policy recommendations are: 1. Adopt a new planning, development and administration system in which individual leases are subject to the operative town plan. This will ensure that a system and process which accommodates the changing expectations and interests of and land use overtime coherently drives the development. This requires a review of the legal and administrative system for land planning, development, and records system. 2. Institute legal and administrative frameworks for strata titling to facilitate transactions on units, apart- ments, and town houses. 3. Introduce a computerised data management system which will enable access to actual sale prices from a standardised database. This will provide useful information for not only informing policy but also for allowing the public at large, to be engaged. The rest of the paper is organised as follows: Section 2 provides a brief background of Port Moresby, the focus of this study. Section 3 describes the data collection and analysis process. Section 4 provides the data analysis and reports on the findings. Section 5 draws policy lessons and implications. The conclusion brings the paper to a close. 2. Port Moresby — Study Focus Port Moresby is the capital city of Papua New Guinea (PNG). Politically, Port Moresby is divided into three open electorates and is headed by a governor. The three open electorates are: Moresby North East, Moresby North West and Moresby South (see Map in Figure 1). The National Capital District Commission (NCDC) and the Motu-Koita Assembly are the recognised lower level governments within the National Capital District (NCD). The NCDC operates as the municipal authority of the NCD. The Motu-Koita Assembly, on the other hand, is entrusted to pursue and protect the interests of the original customary landowners of the NCD, namely the Motuans and Koitabuans. The historical development of Port Moresby, from pre-colonisation to independence is nicely documented in Oram (1976). Until the last five years, the formal segment of the Port Moresby property sector market was stagnant for much of the independence era. During this period, there was rapid growth in property in the informal settlements segment. In fact, the development of the informal housing market slowly changed the landscape of the city, as discussed in Chand and Yala (2012). Broadly defined, all properties developed, either on land under State ownership or customary tenure, in contravention of the approved physical planning and building board regulations, constitute the informal property market. As of 2010, the multibillion dollar PNG LNG Project induced a rapid growth into the property market. This induced a rapid growth of both the formal and informal properties market segment. For instance, the entire Taurama Valley in the Moresby South Electorate was transformed into a high class informal settlement on land which remains under customary tenure, within a space of three years. In contrast, skyscrapers have transformed the hills of Touaguba and Paga, within the Port Moresby precinct. The once settled suburbs of Boroko, Korobosea and Gordons underwent significant redevelopment, changing from standalone to commercial and high density (units/apartments/town houses) accommodation. The ongoing carving out of Page 2 NATIONAL RESEARCH INSTITUTE ISSUES PAPER Port Moresby’s picturesque hill tops, in violation of the prohibitions defined in the Physical Planning Act is testament to the ongoing development of the property sector, both formally and informally (if not illegally in some cases), thereby permanently changing the Port Moresby landscape. The data used in the analysis covers the period, July 2012 to July 2013. This was a critical year when the changes described above were at their peak. The data gathered focused on the sale and rental prices for residential properties and land within the NCD as advertised monthly in The National. All the suburbs within the three electorates shown in Figure 1 are captured in Table 1. Figure 1: Cadastral Map of Port Moresby, National Capital District Source: Port Moresby Cadastral Map Booklet, National Mapping Bureau, 2007. Page 3 NATIONAL RESEARCH INSTITUTE ISSUES PAPER The three electorates of Port Moresby are divided into five distinct localities: Hohola, Granville, Matirogo, Boroko and Bomana. Residential leases are legally registered as per these localities. These areas are further broken up into suburbs (see Table 1). Table 1: Residential property sales and rentals by locality and suburbs Locality Suburb Hohola Gerehu Stages 1, 2, 3, 3A, 3B, 4, 5 & 6; Walala Estate; Rainbow Estate; Rainbow Heights; Ensisi Valley; Waigani North; Waigani Heights; Games Village; Waigani Drive; Morata; Tokarara; Tokarara Heights; June Valley; Garden Hills; Islander Village; Lamana Heights; Hohola 1, 2, 3, 4 & 5; Burns Peak; Gordons, Gordons 5; 5 Mile; Henao Drive; Erima. Granville Konedobu; Paga Hill; Touaguba Hill; Ela Beach; Kok; Airvos Avenue. Matirogo Badili; 2 Mile Hill; Kilakila; Gabutu; Kaugere; Sabama. Boroko Korobosea; 3 Mile; Manu Auto Port; Boroko; East Boroko; Kanage Street; Air Nuigini Village (PX); 6 Mile commercial area; 8 Mile; Malolo Estate; 9 Mile; Nasfund Compound (NPF). Bomana Bomana; 14 Mile. Source: Authors 3. Data Collection and Analysis The data gathered was from the property sales and rentals listings published in the Homes and Property pages of The National. This data was monitored monthly, specifically from the first Tuesday edition of The National over a period of one year from 10 June 2012 to 2 July 2013 (see Appendix A). Properties were advertised by different real estate agents operating in Port Moresby. As shown in Appendix B, a total of 15 real