The first quarter 2018 review issued by leading regional consulting firm ValuStrat reports increased affordability in residential capital values and rents. Office rents became more competitive. Less pressure was seen on the retail sector. Increased occupancy for hotel apartments and 3-star hotels.
Pawel Banach MRICS – ValuStrat Qatar General Manager commented “…Lower oil prices since late 2015 have continued to exert downward pressure on capital & rental values for property across Qatar. Despite the more recent pick-up in oil prices, the status quo remains the same with a downward trajectory evident in the performance of real estate sector.”
Banach further explains ‘This year began with the total value of real estate transactions crossing QAR 4 billion, with marginal declines in transactional volumes as compared to the same period last year. Falling prices led to increased affordability, making real estate prices more competitive. Looking ahead, it will be interesting to see if initiatives such as a widening of freehold residential locations are considered as a way of encouraging further investment in the sector…”
A total of 1,200 housing units were delivered in Q1 2018 bringing the total residential stock to 287,325. Fiscal consolidation in both the private and public sectors contributed to limited staff allowances and new employment opportunities. Coupled with an increase in new supply, this resulted in citywide rental declines. A further 13,000 units are projected to be completed in 2018 of which 75% are concentrated in Lusail and The Pearl.
Qatar’s residential capital values have been declining for the last two years. However, the rate of decline appears to have slowed over the last 12 months to a rate of less than 3% each quarter. The weighted average value of a residential unit during Q1 2018 stood at QAR 8,955 per sq m. More specifically, apartments were at QAR 12,700 per sq m and villas stood at QAR 7,091 per sq m. As of Q1 2018, gross yields averaged 4.8%, with 6 % for apartments & 4.2% for villas.
Citywide residential asking rents declined 11.8% over the past 12 months and 3% since the last quarter of 2017. Rents for villas declined by 7% with biggest declines experienced in West Bay, Old Airport, Lusail and Al Sadd.
“Despite current peripheral development, buyer demand continues to favour central Doha where most business activity is concentrated. Old Airport, Old Al Ghanim, Mushiereb, Doha Al Jadeed and Umm Ghuwailina are emerging as the most competitively priced rental areas. Projected future deliveries and competitive listing prices in these areas is expected to sustain pressure on rental levels and continue to attract tenants as centre areas become more affordable…” says Anum Hasan, Market Research Analyst at ValuStrat. Ms Hasan added ‘…To better understand the trend in prices, and complement existing transactional data, we launched the ValuStrat Price Index which tracks the sale and rental rates of representative residential properties across the country. With this initiative we can update all stakeholders on price changes and impact on yields, so they can make more informed investment decisions…"
As of Q1 2018, office supply reached 3.94 million sq m with an addition of 50,000 sq m during this quarter. Approximately 910,000 sq m is expected to be added during 2018, of which 70% is concentrated in Lusail. Citywide increases in vacancies and new supply is causing downward pressure on rentals in secondary locations. Office asking rents fell 17.5% compared to last year and were 9% lower than the fourth quarter of 2017.
This year began with 26,246 hotel rooms within 134 hotel and hotel apartment buildings. Amongst the total supply, half of which are categorised as 5-star properties followed by 4-star (37%) and 3-star (11%). 24 hotel establishments (46% are 5-star rated) are expected to be added by the end of this year, assuming no construction delays making the total supply approximately 32,000 keys. Qatar Tourism Authority has planned various business and international events to grow visitor numbers and diversify the source of inbound tourists. During first two months of 2018, there was an 84% increase in visitors from Germany compared to 2017. The overall reduction in tourist numbers triggered declines in average hotel occupancy rates by 9%, with exception to 3-star hotels and hotel apartments which experienced increases in occupancy rates by 1.5% and 9% respectively.
Palms Mall, a neighbourhood mall in Muaither completed construction, and Tawar Mall (91,000 sq m leasable area) officially opened during this quarter. Due to increased competition property owners were seen giving incentives to existing tenants, a move which is negatively impacting effective rents.
Since the opening of Hamad Port, cargo traffic has gradually increased and peaked in January, underlining a smooth supply of goods and increasing demand for logistical and warehouse space. Addition of rent-regulated warehousing zones continued to exert pressure on rates for non-subsidised units in Old Industrial Area and Sailiya.
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About ValuStrat
ValuStrat Qatar is part of a leading consulting firm providing Advisory, Valuation, Research, Due Diligence, and Divestment services across a diverse range of industry sectors since 1977. With an office network providing services to over 800 corporate clients including financial institutions, local corporates, multinationals, governments, SMEs, family businesses and start-ups. Some of the key sectors serviced by ValuStrat’s consulting team include real estate, hospitality, healthcare, education, manufacturing, retail, entertainment, transport, and FMCG.
About the ValuStrat Price Index
The ValuStrat Price Index for Qatar’s residential sector is constructed to represent the quarterly price change experienced by typical residential units within Qatar. The VPI uses a weighted sample representing influential locations across the city and is built by our expert RICS Registered Valuers.
© Press Release 2018
