The terrorist bombing of a Marrakech cafe in April, which left 16 people dead, dealt another blow to Morocco's struggling holiday-home industry.
Five years ago, the North African country was seen as a rival to Spain and Italy, a less-expensive alternative, luring pensioners and buyers of holiday homes. Middle East developers such as Emaar Properties, Sorouh Real Estate, Barwa and Qatari Diar announced large, multibillion-dollar developments.
But the global financial crisis, political turmoil in the region and the cafe bombing have brought activity in the market to a halt.
"The second-home market collapsed totally," says David Le Bail, the director of consulting for the international property consultancy DTZ. "There were simply no transactions."
Even before popular uprisings began in the Arab world, the market was slowing. From 2008 to last year, prices for holiday homes in Marrakech fell as much as 50 per cent, according to research by the property company CB Richard Ellis.
The abundance of new developments, many as large as 400 hectares, resulted in an oversupply of luxury villas, often priced between €800,000 (Dh4.1 million) and €1.5m. Of the 10,000 homes available, 50 per cent were vacant last year, according to CB Richard Ellis.
There were fundamental problems in the developers' approach to Morocco, analysts say. Emaar and others were exporting a project model that had worked well in other countries, focusing on expensive villas usually built around golf courses.
Developers typically made deals with the government for land in exchange for building infrastructure. The deals lowered the cost of entry into the market but made it difficult for developers to arrange financing since they did not own the land.
"Only projects with access to other forms of financing are continuing," says Mr Le Bail.
Many of the homebuyers in the developments were speculators who hoped to resell their homes quickly for a profit. But the financial crisis made potential buyers more conservative, especially in the UK, the primary supplier of holiday home purchases in the region.
Morocco lost its appeal when property started plummeting in Spain, Cyprus and other European holiday destinations. UK buyers could get better deals in the more traditional resort areas with better amenities and more frequent air service.
"Morocco was picking up because other places in Spain were getting too pricey," says Robert Lee, an independent consultant.
But the country was not an easy place in which to build, developers learnt. Government permits, restrictions on workers and requirements to use local companies in certain areas added expenses and delays.
"Morocco has proven to be difficult for most international developers," says Mr Lee.
Emaar Properties, based in Dubai, was listed as one of the largest foreign direct investors, with five projects in development. But last year the company's only sales in Morocco were 49 of the 123 homes released in Emaar Tinja, a 230-hectare housing development on 3km of waterfront outside Tangiers, according to a recent presentation to investors.
The project represents Emaar's lowest level of sales for international operations, outside Pakistan. Another 107 homes are expected to be delivered in the project by 2013.
A number of international companies pulled out of Morocco, turning projects over to local developers. A US$2 billion (Dh7.34bn) development in Taghazout, originally planned by a consortium of international companies, is now primarily controlled by Moroccan interests, with Colony Capital, a member of the consortium, left with only a 25 per cent stake.
Work on most of the large projects has stalled. Of six tourist regions that the government had planned to create, three have been put on hold, industry executives say.
But Morocco remains a popular tourist destination. Arrivals jumped 11.5 per cent last year to 9.3 million from 2009. In the first quarter of this year, tourism figures were up 6 per cent from the same period last year, despite the turmoil in the region, which included protests in the kingdom itself.
"Morocco has been evolving for the last several years," says Yassine Hamdouch, a senior vice president at Jones Lang LaSalle. "The investments have not stopped in tourism."
This year, the Four Seasons and Mandarin Oriental luxury chains opened hotels in Morocco, and a Ritz-Carlton resort is expected next year. Thirteen golf courses are scheduled to open in the next three years, adding to the current total of 27, according to the tourism office.
A new constitution approved in a referendum this month offered hope that the country would avoid the upheaval experienced in Libya, Egypt and Tunisia.
The market is "going back to normal", says Mr Hamdouch.
Morocco offers buyers of holiday homes several advantages over its competitors, including tax breaks, long-term visas and a financial system based on French laws. But the political reforms may not be enough to woo buyers back to the market in the short term.
"I believe they need a lot more to restart the market," says Mr Le Bail. "There is increased competition from Spain, Portugal and Greece."
Developers have started lowering prices and offering deals, such as free furnishings, to compete with the low prices in Spain and other areas.
"I'm bullish on Morocco in the long run," Mr Lee says. "But what will happen is that a lot of developers will have to reset their price point."
Property experts say Morocco will start attracting buyers of holiday homes again when developers begin offering apartments and villas for €300,000 and below, once again providing an alternative to the popular European resorts.
"Gone are the days of multimillion-euro palaces," says Mr Lee.