While the drama of a real estate shake-out unfolded in Dubai this autumn, property investors in Doha were quietly hopeful they would escape the worst of the turmoil thanks to Qatar’s firm oil and gas fundamentals.
The country has experienced a real estate boom in the past few years, as double-digit growth and an influx of expatriates led to a shortage of properties to rent or to buy. But the global downturn, coupled with a raft of big projects expected to add to supply in the coming year or so, has punctured the exuberance.
“The market is moving more slowly this quarter but we haven’t seen a drop in prices,” says Andrew Chambers, regional director for Asteco, a property development and services company.
“There’s a big shortage in rentals, making them more expensive than in Dubai or Abu Dhabi. But there’s been a stabilisation in prices, which aren’t rising as they did in the past two years.”
Expansion of the market has been driven by the government, which has allocated 10 per cent of expenditure to infrastructure and introduced regulatory reforms allowing foreigners to own property.
The results are visible in Doha, a small but rapidly expanding city built around a sweeping bay on the Gulf’s shores. A cluster of skyscrapers in the West Bay neighbourhood has grown rapidly but construction is far from complete.
The area has become the new business district. But the infrastructure has not kept up – parking is next to impossible, and muddy roads are often taken over by fork-lift trucks.
Immediately east of the West Bay shoreline is The Pearl development, being built on a reclaimed island. It will include luxurious apartments and villas for up to 41,000 residents, as well as hotels, beaches, marinas, shopping and entertainment areas. Completion is slated for 2011. Qatari Diar, a government real estate agency, and the United Development Company are behind the development.
Another Qatari Diar project is Lusail, a brand new waterfront city for 200,000 people under construction on reclaimed land to the north of The Pearl. It will have its own business district called Energy City.
Colliers International, the real estate and research company, named its latest regional report “A Return to Fundamentals”. For Qatar the report foresees the outlook positive for the residential sector, flat for office and retail, and negative for hospitality, including hotels.
A freeze on rents imposed by the government in February in an attempt to control inflation could impose a limit on growth. For example, there is a high number of empty apartments in West Bay, where landlords prefer not to cut their rents.
Mr Chambers says expats can expect to pay up to QR300,000 ($82,400) a year to rent a three or four-bedroom villa. A two-bedroom flat costs up to QR200,000.
Colliers said a big risk to the office space sector was an expected rise in supply next year. Current office supply was estimated at 658,000 square metres, while office space in West Bay alone was expected to bring another 500,000 square metres on to the market, which would put a squeeze on current average rental yields of 12.3 per cent.
The Colliers report saw greater competition ahead in the retail sector to attract consumer spending. Shopping mall supply was expected to increase 40 per cent by 2011.
But a gloomy forecast for tourism and hotels could be the most worrying for the government, which has embarked on an ambitious programme to expand the country’s cultural and sports offerings.
Colliers said the Qatar Tourism Authority’s target of 1.4m tourists by 2010 may need to be revised down.
Nonetheless, a series of infrastructure projects is forging ahead. These include a new international airport, a “friendship” causeway to Bahrain, and power and desalination plants.
Meanwhile, the poor economic outlook in the US and Europe has prompted an upsurge in interest in jobs in the Gulf. The BBT recruitment agency says it put forward 1,600 British construction workers for jobs in September, up from 600 in April.
