The real estate sector in Oman witnessed its sharpest correction in many years in 2016 as softer oil prices cut demand for high-end properties whereas new supplies continue to enter the market.

“The year had distinct periods of activity and reflection. At the start, there was an overwhelming sense of caution being demonstrated by buyers, developers and potential investors. There was activity but at a marked reduction from the previous period a year before,” says Christopher J Steel, managing partner at Savills, a global real estate consultant.

Agreeing to this Moussa al Dweik, general manager at Tibiaan Properties, says “Recently Omani markets have noticed a decline of the average rentals from 10-20 per cent compared to 2015 rentals and that is of course due to the high supplies in areas like Bowshar, Qurm, Al Khoud  and Mabela compared to the demand.”

The real estate sector had been growing rapidly in recent years, particularly on investments from the private sector that helped fan development. However, things have changed drastically in the past 18-20 months as softness in crude prices cut demand for new houses, offices and retail spaces.

According to Steel, overall, values have been dampened over the year, with the residential leasing and commercial sectors showing declines of up to 20 per cent in some instances. However, it must be acknowledged that not all sectors showed such declines.  The looming over supply of apartments built specifically for leasing purposes has seen the most rental pressure whilst top end villas and compound housing schemes fairing relatively well with only limited value corrections if any.

Muscat’s residential market has been subject to some very challenging economic conditions over the past two and a half years, with average rents since the start of 2014 slipping by 17 per cent on average. While this is a marked fall, it does mask the fact that markets such as Shatti Al Qurm  have registered even steeper corrections (-28 per cent) over this period, according to a report by real-estate consultant Cluttons.

The report indicates, during the third quarter of the current year, average residential rents across Muscat fell by a further 2.3 per cent, following a 3.9 per cent fall in the second quarter, taking the total decline so far in 2016 to 8.1 per cent. This does however mask the fact that year on year rents are down by 11.6 per cent.

“In the case of both villas and apartments however, the rate of rental decline appears to have moderated in the third quarter, following a challenging summer. This was of course exacerbated by the onset of Ramadan,” says Philip Paul, head of Cluttons in Oman.

He adds, “This together with the underlying weakness in the economy has meant that the summer months were amongst the quietest experienced by the market in recent years. Still, the weakness in the residential rental market has persisted for well over a year now with demand gradually ebbing over the course of 2016, driven by widespread redundancies that have now extended well beyond the oil sector.”

Overall there was a decline in rental value but some areas or the properties continues to hold premiums. According to experts, there is a still demand for quality properties, as people tend to relocate to places where they can get better facilities or preferred location to get maximum value for their money.

According to Dweik, “Recently we’ve noticed that developers and investors starts on focusing on where they are and what is their targeted market and its needs by setting up projects that offers excellent facilities, well-built and maintained properties serving the clients' interests as well as their needs.”

Hope for recovery

Most people in the real-estate believes that next year could also be a challenging time though hopes of recovery is still there.

“The real estate sector will undoubtedly continue to be under pressure for as long as the present economic uncertainty prevails.  However, save for a few sectors which face continued pressure due to oversupply, we predict that 2017 will offer a period of calm and relative stability.  The general reduction in construction costs should allow some stalled projects to be revitalised and this will provide the needed stock for 2-3 years hence,” says Steel.

According to him, diversification of the economy, the push for tourism growth and significant infrastructural developments that will become operational in 2017 including the airport will all likely support a solid and secure property market. Oman is not subject to the wide cyclical ‘boom bust’ scenarios that are typical of many neighbouring markets and we are unlikely to see any major downward changes in values over 2017.

“We believe going forward there can only be moderate decline in real estates. Steep corrections that happened in 2016 are unlikely,” says Paul. 

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