Bahrain: Legal changes expected to boost property market

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New incentives for property buyers could stimulate activity in the residential sector of Bahrain’s real estate market, a segment that is beginning to see signs of limited recovery.

On May 20, Bahrain’s Shura Council ratified a motion passed by the elected members of parliament aimed at further stimulating real estate growth by reducing charges for registering newly purchased property. Under the amendment to the land and registration law, the fee for buyers to register property acquisition in their own name will be reduced from 3% of the property’s value to 2%. A further incentive to buyers to make their payments quickly was also approved, with the Survey and Land Registration Bureau to offer a 15% discount on registration fees if payment is made within 60 days of the sale.

According to Faoud Al Haji, the vice-chairman of the council’s public utilities and environment affairs committee, the new rules will spur activity in the market.

“This law will certainly refresh the real estate sector and ensure that it recovers from its current staleness,” he said. “Reducing [registration fees] is the biggest push needed at the moment.”

While the market would benefit from stimulation, it is still unclear when the new law will come into effect, as two articles of the legislation have been sent back to the parliament for further amendment.

If implemented quickly, the cost advantage might be enough to create more interest in a market that some analysts consider to have touched bottom. In a report released in April, international real estate firm CB Richard Ellis (CBRE) said there was demand in the market but buyers had been holding off for more favourable conditions.

“Whilst it is clear that the real estate sector has ‘bottomed out’ in terms of rental rates and sale prices, it is also clear that huge pent-up demand is waiting to cash in on the Bahrain upturn – when it happens,” the report said.

Even with many buyers staying out of the market, CBRE said there was an increase in real estate transactions last year, up by 46%, though this rise came from a very low baseline in 2011.

Another real estate firm seeing signs of a rebound in the market is Cluttons, which also used the phrase “bottomed out” to describe the state of Bahrain’s property sector in a report issued on April 24.

According to Cluttons, GCC-based investors are starting to move into the market, taking advantage of flat prices.

“This renewed interest in investing in property in Bahrain has created a window of opportunity for some landlords to exit investments made at the peak of the market, with manageable losses,” the report said.

Though there is expected to be an increase in supply in the residential component of the market during the second and third quarters, much of this will be lower-cost, state-provided units, with some 6000 homes due to be completed by the end of September, according to Cluttons. This will make a welcome contribution to meeting the demand for state housing, with more than 50,000 families on the waiting list for government homes.

While most are forecasting a slow but steady recovery for the market as a whole, there are still lingering concerns over the potential impact of any significant resurgence of anti-government protests. On May 19, in comments carried by the Arab language Akhbar Al Khaleej and the Gulf Daily News, Nasser Al Ahli, the chairman of the Bahrain Real Estate Society, warned real estate prices in some areas of the kingdom could fall further should there be continued disturbances. Land prices and rental fees have fallen between 40% and 60% in the Northern Governorate as a result of security issues, although there has been positive price movement in other regions, such as the Southern Governorate and Muharraq, he said.

Cluttons also touched on this issue, saying that national uncertainty had taken a toll on the real estate market, but adding that the country was now “entering a period of relative calm”. Funding from the GCC to support social and infrastructure development programmes should also help stimulate growth and boost activity in the property sector, the report said.

With confidence slowly returning to the economy and the real estate sector, the residential segment of the property market should see modest but steady growth this year, especially if the cuts to registrations fees are implemented quickly and investors move in before prices start heating up again.


Erratum: Oxford Business Group would like to apologise for incorrectly attributing a quotation to George Saounatsos in the article entitled New destination: Shifting focus to maintain competitiveness and support expansion which appeared in the Transport & Logistics Chapter of The Report: Bahrain 2012.


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