PHOTO
04 July 2016
Muscat - Along with large supply of residential units, cut in housing allowances by many companies have pulled down the rental market in Muscat. Reports indicate that demand for rented accommodation and particularly larger housing units has decreased, resulting in a 12.7 per cent year on year decline in average residential rents during the first quarter of 2016. "The residential rental market continues to be under pressure as companies are trying to adjust to the market conditions and minimise expenses by reducing headcount and housing allowances," said a report by leading consultancy house PKF.
Over the last couple of years, a large supply of new quality apartments has penetrated the residential market in Muscat, which, however, was absorbed quickly due to a sustained growth in the expatriate population and increasing demand for smaller-sized units. As a result, vacancy rates across the villa segment increased, leading to a 14.1 per cent year on year decline in average monthly villa lease rates. Savills, a leading real estate company, also said that workforce reductions by corporates has resulted in the freeing up of rental homes across the capital.
"The lower inflow of new arrivals is insufficient to absorb the new supply resulting in downward pressure on rentals," Savills experts said in a report on the second quarter. What is apparent is the housing budget cuts being imposed by corporates and the change of new hires from traditional family size units to singles and couples, it said.
"Muscat fortunately has benefited from a large supply of new quality apartments over the last two years and these have been rapidly taken up by the newly arriving expatriates and those that have had to forego larger housing options as a result of budget cuts," it said.
This has to some extent led to an increase in the number of older style, larger family style villas available for rent, but landlords are as yet to reduce their rentals for these to encourage early letting. Landlords of these properties however noted as agreeing token downward rent adjustments upon lease renewal to retain their tenants and avoid vacancy and re-letting costs.
"We expect this trend to continue with larger, expensive villas seeing increasing voids on tenant vacation and ultimately landlords reducing rents to ensure continued occupation," the report said.
While the large number of new apartment developments have been welcomed in the light of the changing demographics of expatriates arriving without families accompanying them, there now exists a real possibility of oversupply and rental stagnation for this property type as significantly more enter the market.
It is estimated that there will be over 1,600 new apartments in the central areas entering the rental sector over the next 12 months.
While those developments offering good amenities and management are likely to be less affected, periods of vacancy are likely to grow with a corresponding downward pressure on rentals.
Muscat - Along with large supply of residential units, cut in housing allowances by many companies have pulled down the rental market in Muscat. Reports indicate that demand for rented accommodation and particularly larger housing units has decreased, resulting in a 12.7 per cent year on year decline in average residential rents during the first quarter of 2016. "The residential rental market continues to be under pressure as companies are trying to adjust to the market conditions and minimise expenses by reducing headcount and housing allowances," said a report by leading consultancy house PKF.
Over the last couple of years, a large supply of new quality apartments has penetrated the residential market in Muscat, which, however, was absorbed quickly due to a sustained growth in the expatriate population and increasing demand for smaller-sized units. As a result, vacancy rates across the villa segment increased, leading to a 14.1 per cent year on year decline in average monthly villa lease rates. Savills, a leading real estate company, also said that workforce reductions by corporates has resulted in the freeing up of rental homes across the capital.
"The lower inflow of new arrivals is insufficient to absorb the new supply resulting in downward pressure on rentals," Savills experts said in a report on the second quarter. What is apparent is the housing budget cuts being imposed by corporates and the change of new hires from traditional family size units to singles and couples, it said.
"Muscat fortunately has benefited from a large supply of new quality apartments over the last two years and these have been rapidly taken up by the newly arriving expatriates and those that have had to forego larger housing options as a result of budget cuts," it said.
This has to some extent led to an increase in the number of older style, larger family style villas available for rent, but landlords are as yet to reduce their rentals for these to encourage early letting. Landlords of these properties however noted as agreeing token downward rent adjustments upon lease renewal to retain their tenants and avoid vacancy and re-letting costs.
"We expect this trend to continue with larger, expensive villas seeing increasing voids on tenant vacation and ultimately landlords reducing rents to ensure continued occupation," the report said.
While the large number of new apartment developments have been welcomed in the light of the changing demographics of expatriates arriving without families accompanying them, there now exists a real possibility of oversupply and rental stagnation for this property type as significantly more enter the market.
It is estimated that there will be over 1,600 new apartments in the central areas entering the rental sector over the next 12 months.
While those developments offering good amenities and management are likely to be less affected, periods of vacancy are likely to grow with a corresponding downward pressure on rentals.
© Oman Daily Observer 2016
