Qatar: Property projections

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For Qatar’s real estate sector, 2012 is expected to be much the same as the preceding 12 months, with most forecasts projecting a year of steady progress, though there are concerns that oversupply in some segments could keep prices down in the short term as the flow of new developments more than matches current demand.

A recent report by property consultancy Asteco said that while rents for residential properties had been broadly stable in the last quarter of 2011, there had been a healthy increase in the number of transactions and enquiries, a trend it expected to continue into the new year. There had also been a rise in the number of sales in prime locations such as The Pearl-Qatar in the fourth quarter of the year, a move the Asteco report said indicated a return of investor confidence.

The improvement in the market could be given further impetus if contracts for major developments, in particular those for the country’s rail network, sporting stadiums and associated construction projects were awarded, said the report, which was issued on January 14.

Though the completion of new projects will continue to add stock to the market, with supply set to outstrip demand, Asteco does see the sector reaching sustainable growth levels by the end of the year, Jed Wolfe, Asteco Qatar’s managing director, told OBG.

“The ever increasing amount of international companies coming to Qatar is having a positive effect on the real estate market,” Wolfe said. “Due diligence and research are being prioritised in order for efficiency and operational costs to reach sustainable levels.”

The somewhat subdued level of activity in the real estate sector last year is reflected in recent data issued by the Qatar Statistics Authority (QSA), which showed that while the 2011 consumer price index (CPI) rose by 2.1%, the rent and utility component of the index eased by 5.6% over the 12-month period.

This could change though, according to a report from QNB Capital, carried by the Gulf Times on January 16, which said the housing CPI was tipped to grow by 1.4% across 2012, as the country’s expanding population – especially due to inflow from overseas – would heat up demand.

Property sales may be given a boost by the higher levels of credit expected to flow into the marketplace this year, with Qatari banks having ample liquidity and increases in disposable income meaning buyers could be drawn towards the real estate sector in greater numbers. A study conducted by Saudi-based Samba Financial in early January predicts that domestic credit growth in Qatar could hit 20% this year, well clear of any other GCC state.

However, one challenge in this regard is the country’s mortgage law, which allows retail borrowers (as well as commercial borrowers) to borrow up to 70% of the value of a property. “There needs to be a distinction and a change in policy between retail and commercial mortgages,” Arron Browne, the managing director of LS:RES, the residential sales division of LS: Keep Moving, a local property firm, told OBG. “Retail mortgages are very unfavourable at the moment and are holding back the real estate sector.”

Though there are some concerns that Qatar could see a glut in the property market with a large number of prestige residential and commercial developments set to be rolled out in the coming year or so, it is unlikely the country will see a major drop-off in activity.

“It is important to control growth in the state’s real estate sector so as not to create a bubble,” Steven Humphrey, the director of Davis Langdon, an AECOM Company, a global construction consultant, told OBG. “However, the risk is low as the money being invested is real and not speculative which should account for real growth.”

Most analysts see any supply side excess in the real estate market as a temporary situation, one that is likely to balance out by the end of this year. As such, investors may be looking at moving into property ahead of the expected rebound gaining momentum, seeking out quality before the next cycle of high demand and higher prices kicks in.

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