Rents have declined 10 15 per cent in the residential market this year versus trends witnessed in 2018, the Sultanates largest integrated realty firm, Al Habib & Co, said in a report issued on Wednesday.
The report attributed the slump to, among other factors, an outflow of white-collar expatriate workers amid a subdued economic environment still suffering the lingering impacts of the oil price collapse in 2014.
The real estate market continues to be soft with further declines in rents and prices. This is mainly due to belt tightening by the government as it mends public finances by shrinking the budget deficit, said Al Habib & Co in its Property Report for October 2019.
The report sought to make the important co-relation between real estate demand and the job market. Citing figures published by the National Centre for Statistics and Information (NCSI), it noted that the number of expat workers in the private sector slipped to 1745K as of July 31, 2019, down from 1787K at the end of 2018.
In particular, the number of white collar expat workers who hold a diploma or higher qualification those most likely to rent apartments had declined 13.17 per cent over the preceding 30 months to 138K down from 159K.
The continuing decline in well-educated expatriate numbers is putting a lot of pressure on rents and occupancies in investment properties. In most cases, enquiries are not from newly arriving expatriates but from those already in Oman, seeking to move to cheaper or better accommodation, it said, noting that, in some cases expats are sending back their families and moving to smaller or shared accommodation.
At the same time, an uptick in the number of Omanis joining the private sector has not translated into strong growth in the demand for residential villas, according to Al Habibs report.
An additional 35K Omanis joined the private sector over the 30-months timeframe to July 31, 2019 when the figure reached 258K. Residential villa permits a key indicator of demand declined to 23.8K in 2018, down from 31.9K in 2016 and 34.9K in 2015, representing a slump of around 32 per cent from its peak in 2015, according to the report.
Significantly, landlords offering clean and well-maintained properties for rent continue to score over those slashing rents as a tactic to attract tenants, the report points out.
Owners, who have been quick to adjust the asking rents downwards, maintain the buildings in good condition and offer good maintenance services, are enjoying higher occupancies rather than those who are less flexible on rents and who do not maintain their buildings well, it said. In the office segment, occupancy levels as well as rents have been a challenge, according to the report. Muscats CBD once the most sought-after destination for banks and offices is particularly impacted, especially in the wake of the departure of major banks from the area. Office rents have also somewhat declined in Qurum, Al Khuwair and Al Athaiba, it said.
Boding well for a reversal of price trends in the real estate market are government initiatives to diversify the economy, the report says. However, prices are expected to stay low for some time until these and other measures to stimulate the economy begin to bear fruit, it adds.
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