|24 December, 2019

GCC real estate deals rebound in last 9 months: report

The report has found that supply-side dynamics are still key for prices and rents.

General view of skyscrapers on Sheikh Zayed Road on September 27, 2017 in Dubai, United Arab Emirates. Image used for illustrative purpose.

General view of skyscrapers on Sheikh Zayed Road on September 27, 2017 in Dubai, United Arab Emirates. Image used for illustrative purpose.

Getty Images/Tom Dulat

MANAMA: Real estate sale transactions in the GCC (excluding Bahrain) rebounded in 9M-2019 (January to September), as total value transacted improved by 15 per cent to $68.8 billion, compared with $59.7bn in 9M-2018, according to Kamco Research, a division of Kuwait-based non-banking financial firm Kamco.

The number of transactions also rose by 25pc over the same period to 429,410 transactions in 9M-2019.

However, Kamco Research estimates suggest that the higher transactions came at the cost of lower achieved prices, as the average value per transaction in the GCC declined by 8pc to around $160,200 in 9M-2019 from around $174,000 per transaction in 9M-2018.

On the lending side, aggregate credit to the real estate sector disbursed by GCC banks at the end of Q3-2019 was down marginally by 0.7pc quarter-on-quarter (QoQ) to $204.1bn.

The report has found that supply-side dynamics are still key for prices and rents.

The GCC residential real estate market will require a combination of lower upcoming supply and lower prices for transactions to sustain the growth rates witnessed over 9M-2019 into the medium term.

Tighter supply would also be needed to eventually restrict tenant migration and a resultant drop in rentals, in Kamco’s view.

Entertainment remains the biggest driver for retail mall space take-up in the GCC, while online retailing affects demand from retailers, and food and beverages (F&B) looks to flexible models such as increased use of dark kitchens also known as virtual kitchens, cloud kitchens, ghost kitchens or delivery-only restaurants.

GCC real estate markets bucked the seasonality driven slowdown trends typically seen in third quarters, as value transacted improved 8pc QoQ to $22.7bn in Q3-2019, while number of transactions jumped by 17.7pc to 148,210 transactions.

In Bahrain, the number of land transactions year-to-date (YTD) until November reached 19,780 transactions, while the value transacted was BD716.6 million.

Average apartment rents in Bahrain improved by 1.5pc QoQ to BD4.67/sqm monthly in Q3-2019, as per real estate research and advisory firm REMI Global, but the oversupply situation remains.

Current vacancy rates and overall weak demand in residential market is also seen in new project activity, as no freehold residential projects were announced, says REMI Global.

The occupancy in Bahrain’s office market improved marginally to 79.8pc, but landlords continue to remain under pressure to find tenants to occupy their office spaces.

Rents however recovered by 3.4pc QoQ to BD6.67/sqm monthly.

avinash@gdn.com.bh

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