Owners are willing to leave property vacant rather than lower rents, says Dino Mahtani
Stand on a street corner in Doha, the only real city in Qatar, and you are more than likely to be surrounded by building cranes and skyscrapers under construction.
Like other cities in the Gulf, Doha is witnessing experiencing an oil- and gas-fuelled real estate boom, but one that the tiny emirate hopes will transform it into the main financial, and oil and gas, hub for the region.
Already the world’s largest exporter of liquefied natural gas, Qatar records billions of dollars in budget surpluses each year – a huge amount for a country whose population is estimated atonly 800,000.
Such a large financial windfall has allowed Qatari real estate financiers to make bold moves in line with the emirate’s vision of challenging the regional economic dominance of the United Arab Emirates and its city states of Dubai and Abu Dhabi.
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Projects in the pipeline in Qatar include a government plan to help develop a brand new waterfront city for 200,000 people, known as Lusail, complete with its own energy industry business district, and a privately-developed plan to sculpt a reclaimed island known as “The Pearl”.
Both projects will take years to be completed. Top-end hotel accommodation is also expected to double by an additional 8,500 rooms by 2010.
Nasser Hassan al-Ansari, the chief executive officer of Qatari Diar, the government real estate investment agency and the project planner of Lusail, says Qatar’s strategy is: “Build it and they will come.”
The problem is that this is exactly the philosophy in other parts of the Gulf, notably Dubai.
The government’s strategy is to leverage Qatar’s huge hydrocarbons reserves to attract businesses.locate there. To an extent, it has worked already. Take, for example, the astonishingly rapid emergence of the Qatar Financial Centre.
As a result of Doha’s emergencegrowth, the housing market is facing acute shortages, especially around the West Bay area, the newest part of the city. Rents prices for a two-bedroom apartment there can stretch beyond $60,000 a year. Office blocks are packed together so densely that there is now a severe shortage of parking spaces.
Mr Al Ansari says that prices will showare likely to dip by as much as 20 per cent correctionin the next twelve12 months as supply comes on-stream, and end users tenants and buyers are offered better- quality alternatives.
But some analysts wonder whether prices will truly reflect the planned supplyconditions, given the closed nature of the property market.
Many landlords of prime property are wealthy enough not to need bank financing or were lucky enough to acquire land cheaply from the emir and so are not under pressure to market their properties immediately.
“It is almost a cartel,” says Nick Witty, country manager for
Some realtorsestate agents in Qatar say that even now, despite shortages, hundreds of offices and apartments downtown remain empty, because landlords are reluctant to drop their pricesbelow a certain value.
But government officials and major realtorsestate agents in Qatar both sayargue that the dynamic for the Lusail and the Pearl will be different because of the sheer hidden demand for them.
Qatari Diar and UDC, the main developer of The Pearl, both say they have been able to sell off parcels of land to developers within days and – in some cases – even hours of offering them to the market, adding that demand has been buoyed by a new real estate law granting foreigners the right of freehold.
They also say they are targeting a niche market, bringing in foreign buyers attracted by the luxurious surroundings of planned marinas, five-star hotels, beaches and shopping and entertainment districts.
“We are going to be the Monaco of the Middle East.” says Khalil Sholy, managing director of UDC. He says adding prices for land have almost trebled on the main sections of the Pearl – even before construction has fully started.
Because of these increases in land prices, developers have been partially able to offset the steeply rising costs inof materials and manpower that have been affecting the global construction industry.
Ultimately, end users will shoulder the rising prices but the government remains confident that enough end users tenants and buyers will buy purchase property off from the developers and that Qatar’s population growth targets will be met.
Mr Ansari estimates that by 2012, Qatar’s population will be as high asreach 1.4m people, and that 80 per cent of the new arrivals will be skilled workers with a high disposable income.
However, many analysts believe these figures are optimistic and say Qatar’s growing population is made up largely of construction workers from the Indian subcontinent.
They are paid low wages and live in labour hostels. Qatar’s last census in 2004 calculated that 26 per cent of its overall population were employed in the construction sector.
The disparity in the calculations used by developers and analysts is wide. Mr Witty estimates that Energy City, the business district planned in Lusail, should hold 40,000 workers to be optimally commercial.
But Hesham al-Emadi, the chief executive of Energy City, estimates the development will bring in up to 25,000 workers when completed in 2011.
The fear among some analysts is that the market will be flooded with too much property and that Doha may ultimately fail to distinguishdifferentiate itself from similar developments taking place across the region, for example in Dubai.from the UAE to Saudi Arabia.
“It’s easy to be cynical, but look what the cynics said about Dubai, which just keeps going and going,” says Mr Witty.
REAL ESTATE
Owners are willing to leave property vacant rather than lower rents, says Dino Mahtani
‘The law of supply and demand will have to kick in, but there may be a time lag’