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For Qatari residents: Do you prefer a summer or winter World Cup 2022?

Demand up..Prices jump

Written by  Author |   Wed, 07 May 2014 13:13

During the global recession between 2008 and 2011, the real estate market in Qatar witnessed a decline mainly due to a contraction in demand which consequently created a decrease in prices for apartments, villas and offices creating oversupply.  But, in the wake of winning the 2022 World Cup bid, and especially as mega infrastructure projects were launched, the property market in Qatari made a quick turnaround.

The country is seeing an increase in the tide of money that has been pouring to construct infrastructure projects and commercial developments in preparation for hosting the much anticipated event with estimated investments of $200 billion over the next eight years. Qatar's real estate has an equally potent growth potential past the World Cup.  Qatar National Vision 2030 will impact all aspects of Qatar's economy ensuring a prosperous and attractive market.

Oil and gas have made Qatar one of the highest per-capita income countries in the world. With the start of 2014, the government has started releasing a detailed schedule of its construction plans paid for with the country's vast natural gas wealth.

Numerous infrastructure projects are attracting foreigners to seek employment in the country.  Companies are also expanding their businesses and recruiting more personnel from outside the country. The population of Qatar, comprised of both nationals and expats, has already crossed the 2 million mark, hence increasing the demand for residential property. According to ratings agency Standard & Poor's, the population is expected to rise by 6% per year through to 2016 and an estimated 120,000 new jobs are expected to be created in Qatar annually for the next two years, which will put additional pressure on the demand side of the real estate sector.

A steady growth
The real estate growth in Qatar is likely to see a boom in 2014 owing to huge demand for land plots, and the trend is likely to continue over the next few years, with the government spending heavily on mega projects, which will give a further push to the market growth. However, the supply in property market is still more than the demand, but given the sharp growth in population over the past few months, largely due to the influx of foreign workers, the demand is expected to remain robust.

According to experts, real estate prices in Qatar are likely to shoot up by 20 to 25% this year, although a proportionate increase in rentals is unlikely, yet there have been speculations about huge rise in rentals in the future, but, it is unlikely with the prevailing trends, experts argue.

Published in a report by Qatar National Bank (QNB), the Ministry of Development Planning and Statistics revealed that inflation due to rents has dropped by 2% last year, and this trend may be reversed in the following months. A four to five percent increase in rental inflation is likely during the second half of the year.

Yet, in its latest report, Ezdan Real Estate reveals that Qatar's real estate sector has grown 44.8% year-on-year in March and has accounted for QR4.2bn ($1.15 billion) compared with QR2.9bn ($797 million) in the same period in 2013. The total value of property transactions in the first quarter amounted to QR11.9bn ($3. 7billion) compared with QR8.8bn ($2.41 billion) Q1, 2013, a growth rate of 35.2%.

Demand for residential property to increase
A natural consequence of population growth and the influx of foreign workers has been the unforeseen increase in residential demand. According to real estate consulting and research at DTZ, lack of new supply and rising demand has reduced availability and led to rental inflation of around 10% over the last year, while others estimate prices to increase by 20-25%. Over the next 12 months, DTZ estimates that approximately 25 residential towers on The Pearl and a further nine towers in the Diplomatic District will increase supply by 7200 apartments. On the other hand, real estate research and advisory group Asteco forecasts the demand in 2014 will incline towards maintained buildings for apartments and compound villas. It is expected for properties outside Doha to see more demand, as the capital city is already packed and prices are high.

Retail follows the trend
Demand for retail space is also increasing according to property firm Jones Lang LaSalle, though some of this will be met by new developments under construction. Like the housing market, demand for retail floor space is driven by a growing and increasingly affluent population. Qatar's retail market consists of malls, souqs, hypermarkets and standalone informal shops; however the current focus is on malls. Real estate consulting and research at DTZ indicates that more than 1 million m2 of retail floor space is to be added by the end of 2016, but excessive construction could lead to oversupply by the end of the decade, says a DTZ report.

Regarding rental prices, Al Asmakh Real Estate Development Company (Aredc) does not expect any major changes in occupancies and rents in Qatar's malls in the near future. "The proposed supply of new malls will be delivered over next two-five years and hence, no immediate impact is probable," Aredc valuation and research wing indicates in a report. New malls offer better positioning, rents, and leasing terms which open choices for the occupants.

Doha and connecting areas of Al Rayyan and Umm Salal already have 13 operational commercial malls. At least 10 new malls, four-five shopping centers and three-four hyper markets are planned within Doha and the neighboring areas within the next four years, Aredc says. Upon completion of all proposed mall projects, the total net leasable areas among all existing and upcoming malls would be 1.61 million m2.

New law to eliminate problems in the sector
The Emir of the country, H.H. Sheikh Tamim bin Hamad Al Thani recently issued Law No. 6 of 2014. The law stipulates curbing recurring problems such as late delivery of projects, and clearly identifies the parties authorized to carry out real estate sector development, and it protects all parties involved in the construction sector, including developers, investors and banks. Under this new law, developers who operate without a license or sell housing units fraudulently can be imprisoned for a year and fined 50,000 Qatari riyals ($13,700). Those who fail to start a project within six months of its approval date may be fined up to 200,000 Qatari riyals ($54,600).
The law has regulated the sale and purchase of real estate in the early stages and eliminates fraud. It also guarantees the rights of those who buy ready-made residential units, and those who have hired contractors to construct luxury homes. The law ensures that projects do not suffer from shortage of funds and each real estate project executed by a company with multiple projects in its portfolio should have an independent bank account.

Moreover, according to the new law, all real estate brokers in the country will have to be licensed and registered. The registration will be given for two years, renewable for the same period. The license for operating as the real estate broker/middlemen will be nullified with the cancellation of the registration of his company/office. The law includes an amendment that attaches a fee to be paid by the real estate brokers/middlemen to all the services being provided by the ministries concerned.

The new law that intends to regulate the real estate market is considered another driver for the construction sector. The market players believe that the law will help check market manipulators and further stabilize the market.

Major real estate developments- BOX
1. $1.23 billion Ezdan Wakrah project is set for completion in 2017.  The QR4.5bn ($1.23 billion) residential project comprising 11,000 residential units in Al Wakrah, which is built in partnership with SAK Holding Group, will be completed by 2017.
2. First phase of Nour AI Wa'ab villas is completed. Stretching over 1.25 million m2 and promoted by Nasser Bin Khaled Holding, the city is one of the largest privately-held real estate projects being developed. Al Wa'ab City confirmed the launch of the next phases of Nour Al Wa'ab villas, with delivery scheduled in phases until the first quarter of 2015. Ninety-two premium Nour Al Wa'ab villas are planned, each with an area of 850 m2, high quality finishes, fixtures, five master bedrooms, internal elevators, three car garages, a private garden and a swimming pool.
3. The Mall of Qatar, developed by UrbaCon Trading & Contracting (UCC), is scheduled to open in the third quarter of 2015. Construction on the project has been underway since 2012. The Mall of Qatar is expected to welcome an estimated 20 million customers annually. The total project cost is in excess of QR3bn and has been secured with funding from Qatar National Bank.  Located at the intersection of Al Rayyan Highway and Celebration Road, the project is adjacent to Al Rayyan Sports Club and a future FIFA 2022 World Cup Stadium.
4. Qatar Exchange (QE) listed firm Mazaya Qatar Real Estate Development Company and Mackeen Holding, a Qatari shareholding company, have announced their plan to merge. The planned merger is in consonance with the real estate and economic boom in the State of Qatar, the notification said, and added the strength of the country's economy necessitating the creation of entities that are able to keep pace with this boom and help achieve the Qatar National vision 2030.
5. Lusail Mixed-Use Development is a waterfront development to the north of Doha expected to be completed in 2019. The lead developer is Qatari Diar, a QIA property investment fund. This phase includes islands, marinas and residential, commercial and business districts.
6. Barwa Al Khor Development is a mixed-use development (villas and town houses, terraces, flats and mixed use areas, 2 sprawling hotels, marina, golf course and shopping malls) to the north of Doha.
7. The Pearl Qatar is a $9 billion ongoing development of a man-made island near West Bay, Doha's business district. It is the largest real estate development in the country and is the first to offer freehold to international investors.
8. The Barwa – Oryx Island, expected to be completed in 2022, is a temporary, pedestrian tourist island for the World Cup. It will accommodate 25,000 fans in 5 temporary hotels and luxury villas and will also include an aqua park.
9. Musheireb is a $5.5 billion mix – used development, a regeneration of the old town Doha. The development will include over 27,000 houses in addition to retail, commercial and touristic areas.
10. Global Building Solutions (GBS), teaming with Qatar-based partners, is developing high-quality Workers' Accommodation Villages. These Villages will operate under the brand name DARUNA ("Our House") and will comply with International and Qatari Standards, including Qatar Foundation's Mandatory Standards for Migrant Workers' Welfare (2013). In cooperation with the Government of the State of Qatar, Qatar Foundation, the Supreme Committee for Development and Legacy, and FIFA, DARUNA will be an end to-end Designer- Builder- Owner and Operator providing a vital price competitive labor solution.

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October / 10 / 2014
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