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Many real estate developments in the Gulf may have been killed off by the financial crisis, but Qatar is pressing ahead with its grandiose property projects.
Despite delays, the $20bn Pearl development on reclaimed islands beyond the West Bay area of Doha is continuing, and the first ring of towers will soon be completed. Officials say Qatar is also progressing with plans to build the 21 sq km Lusail City to the north of the Qatari capital.
However, official optimism and continuing projects cannot mask the fact that the Qatari property market has been hurt by the fallout from the financial crisis.
Investor sentiment has been dented by the regional real estate downturn, and access to mortgages has been severely constricted. Though less affected than some of its neighbors, thanks to heavy government spending and a continued influx of people, rents and prices have dropped markedly.
The overall level of price declines in Doha is hard to gauge because of a lack of sales volumes, but rents at top-tier office towers in the New District have fallen by about 25 per cent since the peak in 2008, and occupancy rates have fallen from 95 per cent then to about 85 per cent, says CB Richard Ellis, property consultants.
Residential compound rents have dipped about 10 per cent, and apartments at completed towers at the Pearl have fallen by more than a third to about QR12,000 ($3,185) per sq m, the consultancy estimates.
“Residential apartments in masterplanned off-plan projects, such as the Pearl, have come under some pressure as confidence in completions is on the wane, as is investor and speculator bullishness,” says Mike Williams, a senior director at CB Richard Ellis.
Yet there is a sense of optimism in Doha that the market will recover, as expatriates continue to arrive in the country.
Euromonitor, an industry analytical company, forecasts that the population of Qatar will swell by almost a third to 2.4m by 2030.
The most important catalyst will be a pick-up in bank lending, experts say. Qatari banks remain reluctant to lend, but are in far better shape than most of their regional peers, and private sector credit growth is forecast to recover tentatively soon.
“There is some belief that mortgage finance will become more widely available in the short term and this will lead a recovery over the coming years,” says Mr Williams.
Sales volumes also appear to be improving - albeit slowly. Coreo Real Estate, a Doha property agency that was founded in late 2008, only saw one sale every other month last year, but now sells one or two properties every month.
“We started in a recession but Doha is probably the best place in the world to do so. People are still waiting to see where prices will go, but they seem to have stagnated recently so I think buyers will return soon,” says Khalifa al Misnad, chief executive of Coreo.
A market recovery will be needed, given Qatar’s number and scale of developments. JPMorgan estimated the country is spending nearly $50bn on the Pearl, Lusail City, the new Doha financial district, Barwa Al Khor, a coastal city north of the capital, and Dohaland, a regeneration of the city’s old parts.
However, progress on some of these is likely to be sluggish. Lusail, for example, is a development by Qatari Diar, the real estate arm of the country’s sovereign wealth fund, and will only be built by developers once demand is healthier, a senior banker predicts.
The Financial Times
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