Interview: Mohammed Khalil Alsayed

How are land scarcity, rising utility costs and a bear market affecting home ownership and lifestyle expectations among the youth population?

MOHAMMED KHALIL ALSAYED: The 2008-09 global financial crisis redrew the boundaries of what is considered luxury housing. Unsurprisingly, there is a greater awareness that providing large villas for each household is not sustainable. However, it would be incorrect to categorise this as a bear market, which is a more apt description for the securities market. Although the housing sector saw a period of significant speculative trading a decade ago, the market has since matured. With the luxury development era behind us, the expectations of consumers and developers are grounded more on sustainability and affordability. Having said that, the luxury market is still present, albeit in a more niche segment.

With regard to land scarcity, the government has identified locations where future generations will be able to secure good housing. Examples include East Hidd City as well as many inland projects such as the recent public-private partnership (PPP) housing project. Overall, I would characterise the housing market as very dynamic. The youth are clued in to the economic environment, and as such, their expectations are based on earning potential and preferred locations.

What are the main factors driving the current oversupply of commercial real estate assets and the shortage in middle class housing?

ALSAYED: With regard to commercial real estate, office space is experiencing an oversupply as a number of projects come on-line. In a September 2019 update, commercial real estate services firm CBRE estimated that commercial office stock would increase by 5% in 2019, with grade-A and B gross leasable area rising to 1.3m sq metres. CBRE predicted that the supply imbalance of the past decade or so is set to continue. However, this has not led to downward pressure on rental rates. The growing trend of serviced office operators and non-traditional office environments will dictate absorption in the commercial rental market in the future. The overall economic environment also has a role to play in the absorption of real estate. The impact could be a combination of older office spaces gradually losing market share and new investments slowing down. This is part of normal economic cycles and is not a cause for alarm. Concerning middle class housing, the market has responded, and the affordable market has become a more relevant segment. A pronounced shortage still exists in social housing, but this is being met with a separate government policy framework. The recent PPP housing project, for example, was one such initiative aimed at increasing social housing supply.

In what ways are ICT developments and innovations transforming the residential market value chain?

ALSAYED: In this age, technology is pervasive in every aspect of modern living. It is natural that the residential real estate space also be impacted by this, as evidenced by the development of property technology (proptech). The current paradigm is characterised by data-powered portals that help builders, owners and financiers interact in an online marketplace.

Taking it a step further, younger generations’ perceptions of real estate are changing, and youth today are less likely to own property or take out long-term mortgages. Increasingly, home ownership as a concept is declining in the West. The Middle East has different perceptions, but we concede to the data-centric approach to any aspect of modern living.

The smart city initiative embraces not only ICT and related aspects, but also environmentally sustainable living. The mechanism of how the value chain delivers services is being shaken up with the entry of data-powered models, although it will take time to evolve. We hope that the entry of proptech firms like Estater, which launched in Bahrain recently, will transform the real estate sector for the common good of all participants.