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Evolutionary RelicYes, ladies and gentlemen, the world-wide housing crisis has reached Oman. You know, that tiny country in the southeast of the Arabian Peninsula who is ranking "only" 25th globally in oil reserves. The Times of Oman let us know of this impending debacle in its article "Sunday Beat: Oman government must avert housing crisis for low-income citizens".

According to this article from 2012 the government allocated OMR 80 million a year to build free housing for people in social security programs. WOW, a whole 80 million a year. Well, it's not like Oman is an oil and gas producing country… oh… wait… it is. Well… it's not like Oman's government owns all the oil and gas under its territory oh…wait… it does. But that's OK, it's not like Oman's government is getting huge revenues from oil and gas to the tune of 64% of all its earnings…oh…wait it is. Well, it must be a fluke. The Omani government is probably not getting that much revenue anyhow. Take a look at the picture below

Oman Government Revenue

Oh…wait… the Omani government is getting richer and richer all the time. But that's OK because obviously the government is sharing this wealth with the people, right? We can see this clearly in the inflation-corrected GDP graph below.

Oman GDP

Oh…wait…since about 2004 the GDP is going nowhere fast. But that's OK because obviously the Omani government has stimulated the economy through Central Bank printing, and thanks to that printing people have benefited immensely. It's not like there is a huge inflation in Oman. Take a look for yourself.

Oman Inflation

Oh…wait…but that's OK because obviously Omani salaries have been growing with the rate of inflation, right? We can see this in the fact that mortgage affordability has remained constant, right? The average age of applicants for housing loans has increased from the age of 31 in 2004 to 37 in 2014. Oh…wait…

But that's all right because the Omani government is fully responsive to the needs of Omani people. After all Oman is an absolute monarchy in which all legislative, executive, and judiciary power ultimately rests in the hands of the hereditary Sultan. Oh…wait…

Nevermind all that negativity. Oman is clearly opening its borders to foreign investors to ensure that economic housing is available, right? It's not like Oman has an aversion to economic freedom, where foreigners cannot own land. Not to mention that the ridiculous rise in rentals (which is clearly unrelated to the ridiculous raise in inflation) cannot be solved through a few well-thought edicts that will ensure that all Omanians will benefit from free markets. Such as:

Landlords may only increase the rent every 3 years, with a maximum rent increase of 7% of the annual rent stipulated in the lease contract.

The law also bars landlords from evicting tenants before the end of the lease, and imposes a minimum lease period of 4 years for residential property, and 7 years for commercial.

Obviously, with that kind of law and order owners will be very tempted to rent their properties, right? Oh…wait…

But that's all right. Foreigner investors will flock to Oman to build economic housing because serious reforms to improve the rule of law and market access for goods and capital are required to raise Oman to higher levels of economic freedom... Oh…wait…

Never mind, never mind. Don't listen to all that negativity. The statistics now prove the existence of a wide gap between affordability of housing and monthly income. Wait…what?

Oh… yes… the Omani government will come to the rescue by possibly using their Pension Funds (public and private) who are invested in the financial sector and… real estate. What? The Omani pension funds have a vested interest in keeping rents high? Oh…wait…

Let's recap this. People cannot purchase their own houses in Oman because the Omani government owns all the oil and gas riches, it is becoming immensely wealthy, it runs a significant inflation, it is a one man operation and has vested interests in not solving the problem. To make matters even worse, it is definitively not foreign-investment friendly.

But that's OK. Something must be done because Oman cannot have a quarter of its population living with their parents until their middle age. And something will be done… just not what would fix the problem…

CONCLUSION

Do we need to add a conclusion here? Let's see. We have a one-man operation who owns a country. Period. Do you actually believe that such an all-powerful person will be concerned, seriously concerned, with the wellbeing of his "subjects"? Of course not!, don’t be ridiculous! The point of this article is that at the root of most of our troubles lies a government. It really does not matter if the government is a monarchy or a tyranny or a democracy, they are all equally devastating.

And now you know why people evolve out of monarchy. Yet, as we predicted many times, evolution is not homogenous; it happens at different times in different locations. This is one of those times and locations where people are still clinging to the old ways. May the force be with them… they are going to need it.

Note: please see the Glossary if you are unfamiliar with certain words.

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