Residential rental rates in Qatar are likely to dip by around 10 per cent in 2009 due to sliding oil prices and companies freezing new staff recruitment, according to a recent report.
The contribution of the real estate sector to the GDP growth of Qatar is expected to go down to about 9.7 per cent of GDP in 2009 from 10.7 per cent estimated for 2008, due to the slowdown witnessed in the real estate sector since the fourth quarter of 2008, said a research report from the Global Investment House on the Qatar real estate sector.
Even while, a sizeable amount of supply is expected to come on stream in the office and residential segments of the market, demand for commercial space is expected to remain stagnant for the next two years, said the report.
RESIDENTIAL RENT PRICES
Around 9,000 new apartments are likely to come into the Qatar market by 2010; however, the ongoing global economic turmoil has put a sudden halt to the property boom in the country. Land prices have dropped by nearly 30 per cent within Doha city limits during November alone; with the rates in the suburbs declining faster. Land plots in a few suburbs are now available for $110 (Dh405) per square metre, which is almost half of the price in the previous month. Property investors are expecting a further fall in land prices in the days to come.
Qatar's Planning Council reported a 154 per cent increase in housing rents between 2005 and 2007, however, recently rents have also begun dropping due to the downturn in the property sector in Qatar. According to some reports, house rents during November 2008 have dropped by as much as 20 per cent. A new apartment, which was otherwise available for $2,747 a month, is now being offered for $2,200, as per industry sources. The average monthly rent of a two-bedroom high-end apartment rose from $900 per month to $1,099 per month in 2005 to $2,747 in 2007, which remained almost the same for the whole of 2008. This was mainly because of a freeze on property rents imposed by the government.
Qatar Government for two years in 2005 set a rent cap of 10 per cent. In 2008, the government imposed a two-year freeze on property rents, effective from yesterday. A new rent law forbids the increase of rents pertaining to contracts signed after January 1, 2005. Increases will only be allowed after two years from the date of the new law i.e. after February 2010. The law also states that rents may be increased for contracts signed before January 1, 2005, up to a maximum of 20 per cent (depending on the amount of rent already paid).
New residential buildings are being completed in large numbers in and around Doha, easing supplies further; there are few takers, and this in turn, is increasing the pressure on property owners. Hence, if a property has to be rented out, the rental rates have to be lower, as per the industry sources.
OFFICE AND RETAIL
Doha is currently facing a strong demand for office spaces, specifically in the new Central Business District area (CBD), the West Bay. The average rent in new CBD is around $90 per square metre per month, marking a significant increase in comparison to rental prices, which was about $27 to $35 per square metre per month at the end of 2005. Office rents have started stabilising for primary grade office space.
REAL ESTATE FINANCING
Credit disbursements to the real sector has grown at an astonishing pace in the last few years, said the report. During 2003-07, total credit facilities of the banking sector grew at a CAGR of 38.4 per cent to reach QR201.6bn, while total credit to real estate sector grew at a higher CAGR of 79.9 per cent during the same period.
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