QATAR – demand outstrips supply
1 December 2014
According to Mark Proudley, Associate Director, Consulting and Research, DTZ, Qatar, in 2014, the real estate market has predominantly been characterised by rental inflation. DTZ research indicates that rental rates for residential property have been rising steadily since early 2011. “Prime two bed apartments in the Diplomatic District/Pearl Qatar that could be rented for approximately QAR 12,000 per month at the end of 2010 are now leasing at rates closer to QAR 15,000 per month, equivalent to a 25% increase over a four year period. It is worth noting that this is still well below the peak of the market in 2008 when rents for two bed apartments in some prime towers reached as high as QAR 21,000 per month,” Proudly commented.
According to the expert, the first signs of rental increases in the office sector have also been recorded this year, marking the first increase since 2011. Primary drivers of rental inflation are twofold and include strong economic performance as well as high levels of domestic investment which continue to generate work and employment opportunities in Qatar, Proudley said.
“This creates inward migration and demand for real estate across all demographic levels and asset classes. In conjunction with high levels of demand, Qatar is also suffering from slow growth in new supply and limited availability of stock,” he added.
STRONG ASSET CLASSES
Looking at the different asset classes, DTZ observed that while the residential sector has witnessed the strongest growth in 2014, all sectors have benefited from continuing growth in demand and limited new supply.
“The hospitality sector has not recorded any new hotel projects opening over 2014 to date, whilst tourist numbers continue to increase. Likewise no new shopping malls have opened over the year yet rising population and a growing economy continue to fuel increased demand,” Proudley pointed out.
“The biggest story has really been rising land prices on the back of speculation on future market prospects. According to data produced by the Ministry of Justice based on actual transactions, average land prices in Qatar increased by 52% in the first seven months of 2014. It should be noted that the data is not fully transparent and cannot be easily analysed and can be skewed by individual transactions; however it does suggest an under lying trend,” Proudely explained.
OUTLOOK FOR 2015
DTZ anticipates a similar story for 2015 with demand continuing to outstrip new supply, placing inflationary pressure on rental levels.
“There is potential for a wave of new supply to come onto the market at the Pearl Qatar but limited new developments targeting the lower to middle income sectors. Inflated land prices will restrict new development of low to middle cost housing in central Doha and we expect to see further expansion of the city suburbs with new developments in Wukhair and Al Kheesa on the outer suburbs of Doha,” Proudley said.
On a final note, the expert added that there is potential for a correction in land prices in 2015, which have reached levels that are not feasible for development.
Qatar 2014 highlights
- Opening of Hamad International Airport
- Strong economic performance continues to drive demand for real estate across all asset classes
- Demand outstrips supply in the residential sector
- In the hotel sector, strong growth in tourist numbers and no new stock has resulted in improved performance metrics