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QATAR – STRONG DEMAND DRIVES MARKET

UAE
OVERVIEW EGYPT KUWAIT QATAR SAUDI ARABIA TURKEY UAE

December 2015

The first three to six months of 2015 in Qatar were broadly a continuation of the market in 2014, characterised by limited supply and strong demand driving rental growth, particularly within the residential and retail sectors, says Mark Proudley, Associate Director, Consulting and Research, DTZ.

Nor surprisingly however, as the year progressed, low oil prices have also been felt in the Gulf state. “Since around May/June the defining factor in the market has been the sustained lower oil prices, which resulted in rationalisation of operations by Oil & Gas companies and also in spending reviews by government and related entities. The impact of this rationalisation and spending reviews has led to a slowdown in demand for commercial accommodation and the prime residential sectors with higher paid expatriates being the main casualties of redundancy programmes implemented following the spending reviews.”

Middle income housing

The other end of the residential market (low to middle income housing) is however seeing some interesting development, Proudley says. Initiatives led by government linked entities have seen the delivery of large scale projects such as West End Park and Baraha that provide a higher standard of modern accommodation with facilities for lower income workers.”

Demand for low to middle income housing in Qatar remains strong and is driven by the continuing growth of the population, especially by the segment involved in the construction of the major infrastructure projects and within the service sectors including new hotels, retail malls and healthcare facilities, Proudley explains. “As noted above the redundancies across the Oil & Gas industry were predominantly restricted to upper income expatriates and have limited impact in reducing demand at lower income levels,” he says.

Strong demand for low to middle income housing has been coupled with limited new supply, particularly within the city centre. “High land prices have been prohibitive to delivering new affordable schemes and [there is] a lack of interest in developing these types of schemes from private developers. The combination of high demand and limited supply are likely to make this a growth sector going forward as the city of Doha continues to develop,” Proudley says.

Land prices have continued to rise over 2015, albeit at a slower rate than was recorded over 2014. Investors and developers are “starting to recognise that land has reached price levels that are not economically feasible to develop,” says Proudley.

Industrial asset class

 Another sector which has shown dynamism throughout 2015 is the industrial/warehousing sector, according to DTZ. The firm has witnessed increased activity over 2015 in the warehousing sector driven by strong demand on the back of continued economic and population growth, the opening of Hamad International Airport and the anticipated opening of the New Port Project.

“Manateq originally established by the government in 2011 has been making headway on a number of warehouse related schemes over 2015. In addition to progressing delivery of the Special Economic Zones, four sites totalling in excess of 2 million square meters of land were awarded to Barwa Real Estate Group, Al Asmakh Contracting, Gulf Warehousing Company and Ali Bin Ali Contracting to develop as new warehouse parks following a tender process,” says Proudley. DTZ expect these projects to transform the industrial market over the coming years by providing international quality warehouse accommodation.

 Outlook for 2016

DTZ anticipates the main challenges in 2016 will be addressing the prevalent imbalances in the market. The prime residential market is likely to be oversupplied in the near future while at the same time, DTZ expect demand to continue to outstrip supply for the lower to middle income sectors.

According to the MDPS Qatar Economic Outlook 2015 – 2017, inflation is forecast to average 2% in 2015. In addition to concerns about Qatar’s inflation rate with regards to the housing market, there are also major concerns about construction cost inflation, which according to an independent report by EC Harris could potentially peek at 18% during a World Cup building boom between 2016 and 2019.

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