Sep 08 2011 |
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Rentals continue to slide in Oman as demand falls
MUSCAT: Residential rentals continued to decline in the second quarter in Oman, with industry sources putting the year to date average rental dropped at 15 per cent. Apartment rents for high-end properties continued to ease faster than affordable housing, thus reflecting the discrepancy in demand and supply in the market, according to a study on GCC real estate sector conducted by Global Investment House."Office rents continued to witness a declining trend as demand softens significantly following the pattern that started since 2008," said the study report released yesterday.
However, supply of grade A office space still lags behind that of lower grades and is renting at a significant premium that could reach up to 33 per cent. An additional 158,000 square metres of grade A space is currently in the pipelines and is expected to be delivered over the upcoming year exerting further pressure in the office market.
No new space addition
Global said Dubai apartment rents decreased 2 per cent in the second quarter, following a 2-per cent decline in the previous quarter. However, villa rents maintained their first quarter levels without any significant declines after a 1 per cent drop in the last quarter of 2010. Selling prices, however, dropped 3 per cent for Dubai apartments led by downtown Dubai, which dropped 8 per cent on a quarter-on-quarter basis and DIFC down 7 per cent on new supply.
In Abu Dhabi, rents of both apartments and villas declined at a fast pace, negatively affected by new deliveries during the quarter. Apartment rents dropped another 8 per cent in the second quarter, same as the first quarter compared to 7 per cent in the last quarter of 2010, while villa rents dropped modestly on selective demand for ready to move in properties.
No new addition to Dubai retail space took place after the 530,000 square metres new supply in the first quarter in and around DIFC.
Global report said in Saudi, the office market followed a similar pattern as in the rest of the GCC as its performance continued to be pressured downwards by new supply and low take up rates in the two major markets of Riyadh and Jeddah.
Vacancy rates remain at an average of 5 per cent in Jeddah, where the market suffers from undersupply of grade A over the past few years, and 15 per cent in Riyadh, which suffers from significant oversupply in the office market.
The residential segment is still the most lucrative exposure as demand significantly outpaces supply on growing population, business activity and an inherent shortage of residential units.
In Bahrain, the performance of the office market in the second quarter was similar to that in the previous two quarters as the country still struggles with oversupply in office space. Rents remained under pressure in the second quarter as a result of the political instability that hit the country.
Affordable housing
"The residential market followed a similar pattern as it suffered from falling asset prices and rents with new supply entering the market."
On the other hand, the pent-up demand for affordable housing is still persistent in Bahrain. This has prompted the government to take measures such as the launch of the new housing scheme worth 2.5 billion Bahraini dinars launched in the first quarter along with plans to construct 50,000 social housing units, to be completed over the next three years.
In Kuwait, the residential segment maintained its position as the most buoyant segment in Kuwait's reality market. The residential market in Qatar continued to show signs of stabilisation in the second quarter after a mixed performance in the previous quarter with rental prices still hovering around their previous levels in most areas with minor changes on both sides.
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