Home sweet home: A growing population is driving demand for more affordable housing

With comprehensive infrastructure improvements and dozens of tourism developments in progress, it is not hard to understand why Doha’s skyline seems to have as many cranes as it does skyscrapers. The country is set to spend more than $200bn on construction over the next 10 years, according to a 2013 report from consulting firm Deloitte. The population, meanwhile, has undergone markedly faster growth over the past few years. Between 2008 and 2013, the population grew an average of over 5% each year, according to data from the Ministry of Development Planning and Statistics (MDPS). Between December 2012 and November 2013 alone, the population grew 12.5% from 1.83m to 2.05m. The lion’s share of this growth is the result of expatriate workers arriving to the country’s shores. In the first five months of 2013 alone, for instance, 130,000 new workers arrived, according to the MDPS.

The potent combination of economic progress and population growth is driving demand for housing in the state. The MDPS found that rising rent, utilities and related housing services were by far the largest driver of the country’s growing consumer price index in October 2013, according to its publication, “Qatar Economic Outlook 2013-14”. Average housing inflation was just over 6.3% year-on-year between July and October 2013, according to data from the report. Furnished apartments in particular have been fetching higher prices. Rents in these units increased 12% in 2013, Doha-based Al Asmakh Real Estate Development told local English-language daily The Peninsula. According to Asteco’s report from the fourth quarter of 2013, the undersupply in the market eased somewhat in late 2013 compared to the third quarter of the year as three new residential towers in The Pearl were released.

Affordable Options

While the general market is feeling supply pressures, the crunch is even more acute in the affordable housing segment. According to the US-based Affordable Housing Institute (AHI), affordable housing is “market-quality accommodation that can be afforded by people of lower incomes, usually measured as a society’s bottom income quartile”. In addition to being affordable, housing “must not make inhabitants feel second class, or isolate them in enclaves”.

Across the GCC, increasing stocks of affordable housing have not kept up with burgeoning demand. These shortfalls are reflected in housing survey data gathered by AHI and Ernst & Young Middle East. Their survey indicated that only 44% of respondents in the eight Gulf countries surveyed (GCC, Iraq and Yemen) said they were “totally satisfied” with housing services provided in their respective countries. Over 20%, meanwhile, indicated they were either “neutral” or “unsatisfied”. Compared to their peers in the region, Qatari nationals had the most positive attitudes about housing policies, with 75% of respondents saying they were “totally satisfied” and 25% indicating they were “satisfied”.

Homes For All

While it has done well compared to its neighbours, Qatar still faces the challenges of guiding its housing sector in a direction that will create more affordable homes for all segments of society. In the past few years contractors have tended to focus largely on upscale offerings.

“Most private developers still only want to look at the five-star villa and luxury apartment market, but with Gulf countries like Qatar undergoing a dramatic transformation as they move towards their respective 2030 visions, the current social infrastructure is simply not acceptable,” Steve Miller, senior vice-president of business development at Mumbai-based Shapoorji Pallonj, said at the Qatar Projects conference in May 2013.

“We’re not just talking labourer accommodation either.

Well-designed and well-cared-for accommodation is equally important for the middle-class semi-professional and professional families who need cost-effective accommodation solutions as the cost of living in the region continues to rise.”

Beltone Financial released a report at the end of 2013 that predicted inflation in the housing market will rise if affordable housing supplies do not increase.

A 2013 report from Deloitte echoed these findings.

Increasing Availability

Some developers have already put affordable housing projects in their plans. Doha-based Ezdan Holding Group is working on 10 new residential developments mostly around Al Wakra, located 20 km south of central Doha, Ali Al Obaidili, the group’s CEO, told the local press in April 2013. Demand for this type of unit seems to be resilient. Rents at 2000 affordable units in Mesaimeer and Assailiya rose 20% between 2011 and 2013, but even with the rent increases, occupancy held strong. Doha-based Barwa Real Estate, a private firm with government ties, built the units and maintains them through its subsidiary Waseef.

The government has been exploring credit assistance as a way of encouraging higher homeownership, a policy that could have knock-on effects for affordable housing. The idea is to bridge the gap for those who want to buy a home but cannot obtain a mortgage. In this way, homeownership and investment in housing stock could increase. The state established a programme with Qatar Development Bank’s (QDB) Housing Loan Department to facilitate home loans and land allocation to Qatari nationals in 2009. In its first year, over 5000 Qataris took advantage of the programme, which allowed them obtain home loans of at least QR600,000 ($164,340). In 2011 the government increased the QDB’s loan and advances portfolio to a total of QR1.2bn ($328.7m).

Making more funds available to Qataris could help address the affordable housing issue by bringing more units into a middle-class price range. State support for nationals can only be one piece of the puzzle, however, since nationals make up under 10% of Qatar’s total population. Finding ways to offer credit to long-term expatriates, for example, might allow more middle-class residents to buy units rather than rent them, easing demand in the rental market.

Closer Collaboration

The private sector’s current construction of affordable housing and state-supported home loans are moves in the right direction, but they will not likely tackle affordable housing demand on their own. Some stakeholders advocate for closer collaboration among public institutions and private contractors to streamline adjustments in the market. At the Doha Leaders in Construction conference in April 2013, representatives from France-based Bouyges, UK-based Atkins and Shapoorji Pallonji discussed opportunities for more public-private partnerships in the housing sector. The three speakers brought up current issues like coordination among government agencies and balancing risk between public and private actors.

The key seems to be addressing the issue from several different angles. With the state’s population set to continue to rise going forward, demand is only likely to increase in the near future. As a result, without a significant boost in supply, rents will likely continue to rise. Expanding loan programmes could put more power in buyers’ hands and correspondingly help free up supply in the rental market. Closer coordination among government agencies and private developers, meanwhile, could ensure that rent increases are moderated and supply continues to keep pace with rises in demand.

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The Report: Qatar 2014

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