The real estate industry in Papua New Guinea (PNG) has faced a tumultuous journey in recent years, marked by both challenges and promising opportunities. According to Tom Snelling, the CEO of Hausples – PNG’s premier real estate platform – the market is currently in a “recovery phase” after a period of strain following the commencement of the LNG project in 2014. Snelling’s insights shed light on the complex realities that developers, property owners, and prospective buyers, and renters navigate in the PNG real estate landscape. From affordability concerns to regulatory hurdles, limited financing options to infrastructure deficiencies, the industry grapples with a multitude of obstacles that have hindered its growth and accessibility.
The Affordability Crisis
One of the most pressing issues in the PNG real estate market is the lack of affordability for both buyers and renters. Snelling estimates that a staggering 80% of properties in the country are considered unaffordable. This housing crisis has led to the growth of informal settlements, contributing to law and order problems.”The PNG real estate market is undergoing a recovery phase,” Snelling tells Exepreneur. “However, the issue of housing affordability remains a critical challenge, with around 80% of properties considered unaffordable for both buying and renting.”This affordability crisis has far-reaching implications, limiting access to decent housing for a significant portion of the population and hindering the overall development of the real estate sector. Addressing this challenge is crucial not only for improving living standards but also for fostering a more inclusive and sustainable real estate market.
Regulatory Hurdles and Land Complexities
Another major obstacle in the PNG real estate sector is the complexity surrounding property titles and land ownership. Snelling highlights the delays in obtaining property titles, which hinder development and sales. This issue is further compounded by the fact that 97% of the land in PNG is under customary tenure, much of which is undocumented.
“Delays in obtaining property titles is a critical challenge that hinders development and sales,” Snelling explains. “This, combined with the fact that 97% of the land in PNG is under customary tenure, with much of it undocumented, creates significant regulatory hurdles for the real estate industry.”
The lack of clear and streamlined land ownership and titling processes poses a significant barrier to real estate transactions, investment, and development. Navigating the complex web of customary land tenure and obtaining the necessary approvals can be a daunting and time-consuming process for both developers and prospective buyers.
Limited Financing Options and Infrastructure Deficiencies
Access to financing is another significant barrier in the PNG real estate market. Snelling notes that the lack of affordable financing options, particularly for low-income groups, has exacerbated the housing affordability crisis. Additionally, the country’s deficient infrastructure, such as inadequate roads and utilities, further compounds the challenges faced by developers and property owners.
“The lack of affordable financing options, especially for low-income groups, has contributed to the housing affordability crisis in PNG,” Snelling says.
“The country’s deficient infrastructure, including inadequate roads and utilities, also poses a significant challenge for the real estate industry.
“The limited availability of affordable mortgage products and other financing solutions restricts the ability of prospective homebuyers to enter the market. This, in turn, limits the potential for real estate development and investment, as developers struggle to find buyers and renters who can afford their properties.
Moreover, the lack of reliable infrastructure, such as well-maintained roads, reliable electricity, and efficient water and sanitation systems, adds to the costs and complexities faced by real estate developers. These infrastructure deficiencies not only hinder the construction and delivery of new housing units but also impact the overall livability and desirability of existing properties.
Rental Housing Neglect and Valuation Disputes
The real estate sector in PNG has also been impacted by the government’s focus on home ownership schemes, while neglecting the rental housing market, particularly for low-income groups. This imbalance has been highlighted in a study by the National Research Institute (NRI). Additionally, Snelling notes that valuation disputes have been a recurring issue, further complicating transactions and development in the real estate industry.
“The government’s housing policies have primarily focused on home ownership schemes, neglecting the rental housing market, especially for low-income groups,” Snelling explains.
“Valuation disputes have also been a recurring challenge in the real estate industry, adding to the complexities faced by developers and property owners.”The lack of attention to the rental housing market has left a significant portion of the population without access to affordable and secure living options.
This oversight has contributed to the growth of informal settlements and exacerbated the housing affordability crisis. Furthermore, the recurring valuation disputes add a layer of complexity to real estate transactions, creating uncertainty and hindering the smooth functioning of the market. Resolving these valuation issues will be crucial in fostering a more transparent and efficient real estate ecosystem.
Security Concerns, Environmental Risks, and Informal Settlements
The real estate sector in PNG also grapples with security concerns, environmental risks, and the growth of informal settlements. Snelling emphasizes that these factors have a significant impact on the industry’s development and the overall living conditions of the population.
“Security concerns, environmental risks, and the proliferation of informal settlements are additional challenges that the real estate industry in PNG must contend with,” Snelling says. “These factors have a substantial impact on the sector’s growth and the well-being of the country’s residents.
“The prevalence of security issues, such as crime and civil unrest, can deter investment and development in certain areas, limiting the growth of the real estate market. Additionally, environmental risks, such as natural disasters and climate change-related threats, can pose significant challenges to the construction and maintenance of properties.
The growth of informal settlements, often characterized by substandard living conditions and a lack of access to basic services, further compounds the challenges faced by the real estate industry. These informal settlements not only contribute to law and order problems but also limit the potential for formal real estate development and investment.
Opportunities for Growth and Development
Despite the numerous challenges, Snelling believes that the PNG real estate market holds immense potential for growth and development. He emphasizes the need for regulatory reforms, improved financing access, and infrastructure investments to unlock this potential.”While the real estate industry in PNG faces significant hurdles, there is tremendous potential for growth and development,” Snelling states. “Addressing the regulatory, financing, and infrastructure challenges will be crucial in creating a more robust and accessible real estate market that benefits both developers and property owners.
“Regulatory reforms that streamline the land ownership and titling processes, as well as the development approval procedures, could significantly improve the ease of doing business in the real estate sector. This, in turn, could attract more investment and spur the construction of new housing units, helping to address the affordability crisis. Improving access to affordable financing options, particularly for low-income groups, could also be a game-changer. By providing prospective homebuyers and renters with the necessary financial resources, the real estate industry can become more inclusive and accessible, fostering a more equitable and sustainable housing market. Furthermore, investments in infrastructure development, such as the construction of reliable roads, utilities, and public transportation systems, could enhance the livability and desirability of properties, making them more attractive to both buyers and renters. This, in turn, could stimulate further real estate development and investment.
Snelling’s insights highlight the complex and multifaceted nature of the real estate industry in PNG. Addressing the affordability crisis, streamlining land ownership and titling processes, improving access to financing, and investing in infrastructure will be critical in fostering a thriving and inclusive real estate sector. As the country navigates these challenges, the real estate industry in PNG holds the promise of contributing to overall economic growth and improving the living standards of its citizens. With the right policies, investments, and collaborative efforts, the real estate sector in PNG can become a driving force for sustainable development and prosperity.
The real estate industry in Papua New Guinea faces a myriad of challenges, from affordability concerns and regulatory hurdles to limited financing options and infrastructure deficiencies. However, as Snelling’s insights reveal, the market also holds immense potential for growth and development. By addressing the key issues through regulatory reforms, improved access to financing, and strategic infrastructure investments, the real estate sector in PNG can become a catalyst for economic growth and social progress. Unlocking this potential will require a concerted effort from policymakers, developers, financiers, and the broader community. As the country continues its recovery phase, the real estate industry in PNG stands at a crossroads. The path forward demands a comprehensive and collaborative approach that prioritizes affordability, accessibility, and sustainable development. By overcoming the current challenges and capitalizing on the opportunities, the real estate sector in PNG can contribute to a more prosperous and equitable future for all.
