Which factor may slow Bahrain's property market growth?

Renewed economic stability in Bahrain, which has stabilised the country’s property market, has been tempered slightly by the weakness of oil prices, automatically affecting the level of office take up, job creation levels and therefore residential demand, according to Cluttons.

The real estate consultancy’s ‘Spring 2015 Bahrain Property Market Outlook’ report indicated rents and values across the residential market are yet to see a notable impact, but low oil prices are expected to further undermine economic growth, which slowed to 4 per cent last year, from 4.9 per cent in 2013.

“The strength of the turnaround in 2013 was largely attributed to resumption in the disrupted oil exports. In the current global climate, the serious challenge of oil prices remaining well below the government’s forecast is seen to be taking centre stage,”  Harry Goodson-Wickes, Head of Cluttons Bahrain and Saudi Arabia, said.

“With that in mind, the residential market remains at high risk of losing its momentum of growth and we expect rents to remain stable, with declines likely as we approach the end of the year and demand starts to weaken.”

Sales stable

The report also highlights that, unlike the residential lettings market, outlook for the sales market is stable as a result of the government’s recent series of policy announcements designed to bolster residential investor sentiment over the short to medium term.

“Headlining these regulatory changes has been the announcement of the resumption of several landmark schemes that have remained dormant, tantalisingly close to completion since the onset of the financial crisis. While it is unclear how the stalled residential projects have been selected, by tackling projects such as the iconic Villamar development in Bahrain Financial Harbour through the engagement of Gulf Finance House and Saudi based Al Rajhi Bank, we can see that there is strong underlying commitment by the authorities to those who are heavily invested in the residential market,” Goodson-Wickes added.

Office market

The office market has remained mute, with rents in Al Seef continuing to fluctuate between BD 5-5.5 per square metre, with little movement recorded elsewhere. Diplomatic Area and Financial Harbour area that registered rent declines of close to 6 per cent in 2014, have stabilised and no further decrease has been recorded so far in 2015.

“Our short term outlook is for office rents to continue at the current rate, with downward corrections likely to materialise later in the year and into 2016 if oil prices remain in the $50 to 60 per barrel bracket. Furthermore, should the $10 billion GCC Support Fund agreed in 2011 for Bahrain be renegotiated, as the region’s governments feel the strain of falling hydrocarbon receipts, the likelihood of a slowdown in infrastructure project spending will be a very real threat,” said company’s international research and business development manager Faisal Durrani.

“The implications for demand in the commercial and residential markets would be tremendous, but this is a risk we are monitoring closely as it does not currently sit in our central forecast scenario.”

Elsewhere in the commercial landscape, the retail market continues to remain resilient and is still expanding, with Saudi tourists in particular visiting Bahrain in large numbers each weekend to avail of the kingdom’s growing retail offering.

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