Qatar's real estate sector is on course to post a strong performance this year, having had by its own standards a slow 2009, though by any other measure the industry rode out the global economic downturn with ease.
Qatar's GDP is projected to expand at a rate of 16% this year, one of the highest anywhere in the world. Coming on top of 9% growth in 2009, according to figures recently released by the central bank, it is easy to see why there is a sense of optimism surrounding the country's economy.
There are estimates that the Qatari real estate sector will grow by around 7% in 2010, mainly as a result of existing and new developments. Though this rate of growth is below the projected GDP expansion, it will still represent a solid performance in a sector that has seen steep downturns across the region.
A recent study conducted by the market research firm Dun & Bradstreet indicated that business sentiment in Qatar was on the rise, with the improved mood likely to have an impact on the property market.
Significantly, well over one-third of all respondents to Dun & Bradstreet's "Business Optimism Index" survey – released in mid-April – said they expected borrowing conditions to improve in 2010, with 32% saying they were considering expanding their operations. Overall, the study showed an across-the-board improvement in confidence for sales volumes, prices, employment levels and new orders for the second quarter, all of which bode well for the real estate sector.
According to Michel Gebrael, the project manager of Project Qatar 2010, real estate is set to rebound from any fall in activity it experienced over the past two years.
"Qatar's construction and property sectors have been performing exceptionally well within the downturn, thanks to a stable economy and a good tourism and housing base," he said in an interview with local press on April 10. "This year promises even more productivity as industry sets its sights on post-crisis business."
The government is due some of the credit for this sound performance. Along with the associated construction industry, Qatar's real estate sector benefitted greatly from the government's measured interventions in the marketplace, through its moves to prop up the banking sector by buying large stakes in banks' property portfolios and roll out a stepped-up programme of infrastructure developments.
The first measure saw billions of dollars pumped into the country's banking system, restoring confidence in the sector and encouraging the finance industry to maintain loan activity to the private sector. The second measure, involving investments in transport, tourism, industry and social infrastructure projects at an unprecedented level, will vastly increase Qatar's appeal as a business and residential destination, thus boosting the real estate sector's prospects.
Yousif R Al Khater, the chief executive officer of real estate developer the Barwa Group, believes that having one of the fastest-growing economies in the world, combined with the strong state commitment to ramping up infrastructure spending, means that Qatar's property market will go from strength to strength.
"Strong demand has been fuelled by consecutive years of high economic and population growth, with Qatar's real estate sector expected to fare better than many of its regional counterparts," he told an investment conference at the end of March. "Qatar's tremendous real estate and whole-economy growth year-on-year has occurred alongside the expansion of foreign investments."
In another move that could herald a jump in activity in the residential segment, in February the government lifted a ban on price rises in the rental segment. With the prospect of better returns, investors may be drawn back into the residential market, either buying existing properties as a long-term investment project or looking at new projects that are coming off the drawing board.
However, the rental freeze is still in place for retail and other commercial properties, with the government hoping that by maintaining the ban until February 2011, more businesses will take advantage of capped rent costs to either open their doors or expand existing operations.
While there may be an increase in demand for new sales properties for use as rentals, there could be some delay to this knock-on effect. A report issued in early April by property firm Century 21 Qatar pointed to an uptick in real estate demand across most asset classes, though an increase in supply of residential properties has seen rental costs fall for apartments, a trend the company expects to continue into the middle of the year.
It may still take some time before a balance of supply and demand in the real estate market is achieved but this should come sooner rather than later, especially as the government's long-term programme of attracting investments will see private spending rise and banks further ease lending restrictions. With confidence climbing and capital on hand, Qatar's real estate sector can look forward to even better returns in the latter half of this year.