Bahrain’s property sector has been torpid through most of 2010, but developments towards the end of last year are likely to add impetus to the market.
A new year has brought fresh optimism to players on the supply side of Bahrain’s property market, who have just witnessed a year of challenges as the Kingdom absorbed additional stocks of residential, office and retail space.
In its latest report on the real estate sector in Bahrain, property consultants CB Richard Ellis (CBRE) foresee 2011 starting off slowly as buyers continue to seek bargains and sellers look for evidence of market recovery. Nevertheless, it’s likely to remain a buyer’s market, particularly for those developers and individuals with strong cash positions.
The local economy continues to perform well, with growth predicated at four per cent this year, which, along with a rebound in oil prices, will further enhance optimism. In addition, the government plans to spend around BD240 million over the next two years in housing projects and BD116 million on housing services.
Real estate developers are also expected to show an increased appetite for low-cost housing, where there is an identifiable demand.
The World Cup factor
The surprise emergence of Qatar as a host for the 2022 FIFA World Cup will have a precipitating impact on evolution of neighbouring economies such as Bahrain, believes CBRE.
“Now more than ever, the significance and impact of the long-planned Friendship Bridge between Bahrain and Qatar
is being considered,” says Mike Williams, senior director,
CBRE Middle East Research and Consultancy.
While Qatar’s efficiency in managing heavy traffic during the World Cup will be greatly increased, Bahrain is likely to benefit from a massive tourist inflow given the ease of access through to Saudi Arabia and the option for fans to use the Kingdom as a staging post for day trips into Qatar.
Furthermore, the sheer scale of infrastructure development in Qatar over the coming years is likely to stimulate investment and business growth throughout all sectors in the Kingdom, particularly after the Friendship Bridge opens in 2017.
Office space
The volume of new office space entering the market in 2010 and 2011 is significant and its impact is already being felt, CBRE reports. Rental rates fell in Diplomatic Area, which faces chronic parking problem and access issues. While many tenants have moved to Seef district, new office space in the area has outstripped demand, resulting in rental rates and occupancy levels being squeezed.
Landlords are now offering tenants incentives with rent-free periods up to five months and turning to property management firms to enhance the appeal of each property.
Residential market
Tenants remain price-sensitive as housing allowances are curtailed by companies as part of a cut-down on expenditure. With more residential projects coming on-stream, rental rates have now fallen back to pre-2008 levels, CBRE notes. In addition, private developers are struggling to meet the affordable demand due to the cost of land, which has been inflated by land speculation of past years.
But the consultancy remains optimistic. “Given the historic vitality of the Middle East economies, rapid decline and growth are not uncommon and we see recovery, when it does come, being relatively swift,” Mike adds. So, another year of some flux would appear to be the order of the day!
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