Building for the Future


Economic News

22 Jul 2010
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Though the Gulf media has been giving increasing coverage to a possible easing in the region's real estate market and falling share values of some of the Middle East's leading property developers, it seems that Qatar isn't taking a lot of notice.

Almost every week, one of the emirate's growing number of developers either unveils a new project or announces the completion of a stage of an ongoing real estate scheme. One of the country's highest profile developments - The Pearl-Qatar - has just seen another of the key elements of $5bn project put in place, the filling of three marinas built on a series of man made islands off the coast.

When completed in 2009, The Pearl, a project of Qatar's United Development Company, will offer a range of hotels, recreation facilities and luxury residences for 5000 people as well as adding about 400 hectares to the landmass of the emirate.

In early December, Abu Dhabi Investment House (ADIH) announced it had already raised half of the $500m it had targeted as the start up capital for its new $3bn development, the Qatar Entertainment City to be build to the north of Doha.

The new project's name may be a bit misleading for in addition to hotels, theme parks and shopping facilities, it will also have extensive residential complexes. The Qatar Entertainment City is just part of a much larger development, known as Lusail City, that will ultimately house 200,000 people, representing a quarter of Qatar's current population, when finished in 2010.

Along with the Entertainment City, there will also be Energy City, a $2.6bn project that its developers hope to see serve as a residential and business hub for those in the energy sector.

Launching the second stage of the scheme, which encompasses the residential arm of the project, on December 5 ADIH chairman Esam Janahi said that Qatar was emerging as an investment hub in the region and that the development was tapping into the inherent growth potential of the country and the region.

Qatar's booming economy had prompted the development of Energy City and the speeding up of the residential component of the project, Bob Moore, Energy City's CEO, said.

"Finding suitable, high-quality and affordable accommodation for staff is one of the major obstacles for international companies moving into an economy developing as rapidly and successfully as that of Qatar," said Moore.

Qatar's property boom is being driven at different levels, with the demand for tourism, residential, office and retail accommodation all contributing. With official projections tipping a 150% rise in tourist arrivals, spawning a 300% increase in hotel room numbers, within the next four years, along with a potential addition of 500,000 to the country's population by 2012 - mainly additional workers to keep the economy's wheels turning - all forms of property are going to be at a premium.

However, there has been a down side to the property boom, with rents driven up as demand outstrips supply and added fuel to Qatar's inflation rate. This has hit at the residential, professional and retail markets, negating the government's efforts to rein in rental increases by mandating a ceiling of 15% annually. Many landlords have circumvented the legislation by only agreeing to one-year leases, freeing them to hike rents to meet market conditions when the contracts expire.

Another factor that has sent rents spiralling has been Qatar's staging of the Asian Games, which brought a scramble for retail space that was made even more hectic by the demolition of parts of some shopping districts to make way for sporting facilities or as ongoing redevelopment projects.

Rents in some established central retail areas of Doha have risen 300% in two years, while those in newly constructed shopping complexes are even more expensive. However, while there may be an easing of demand, and subsequently of the increase in rental rates, there is little indication that retailers will see a fall in tariffs.

While it might be tight for those renting in the Qatar property market, the good times seem set to continue for both developers and investors. Many of the country's premier residential projects have already been sold out, even before the foundations have been laid, the properties having been bought off the plan.

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