Bahrain's real estate market hit by unrest
Part of Bahrain's real estate sector has halved in value as a result of the unrest, said a new study, adding that only a handful of investors have gone ahead with development projects since February 2011.
It will take years for the market to fully recover due to the absence of demand compared to supply, the report's author and Manama Municipal Council vice-chairman Mohammed Mansoor was quoted as saying in our sister publication, the Gulf Daily News.
The report, which focused on Bahrain's two biggest investment hubs in Seef and Juffair, said there were no buyers despite land and property earmarked for investment halving to BD100 ($265) per sq ft.
"Many are not willing to start investment plans on their plots because they are worried that they may not get their money's worth in future as Bahrain's market is already oversaturated and can't withstand an unnecessary influx," said Mansoor.
"Millions are at stake and investors can't wait for seven to 10 years to get their funds back or register profitability.
"The market has shown recovery that has brought the investment rate to 50 per cent from the potential expected, but the remaining 50 per cent is still an issue that needs addressing."
Mansoor, whose study focused on potential solutions for municipal councils, said more co-operation was required from economic experts to help give them feedback on how to revive the market.
He believes the market is lacking positive indicators despite some investors pushing ahead with their plans.
"Real estate is now 50 per cent cheaper, but investors are not willing to buy because they believe it is too risky," he said.
"For example, Seef and Juffair, Bahrain's two biggest investment hubs - are now BD100 per sq ft from their original BD200. Whenever those two areas show improvement, off course with proper attention from all those concerned, then recovery will be right across the country."
Mansoor said the government was not willing to buy land in either area to speed up investment projects because it was expensive.
"We have to be realistic, the government can't afford buying plots there and even if they buy they will have to look for investors to carry out projects on them," he said.
The study said councils should change their classification rules and allow more developments.
"We assure people that we will not allow multistorey buildings in residential areas, but there are commercial districts that are good for multimillion dinar investments that we could allow to be utilised, especially in areas that are good investment hubs," he said.
"Tubli and Muharraq, for example, are emerging areas that are showing good signs, but require a relaxing of classification rules to have more investments in them. The problem is that investments have clustered in Seef and Juffair, which have created a name in the market that others can't match.
"Building confidence again is more difficult and will take time, but hopefully we will be able to raise the investment by 20 per cent within the coming five years - I am being very optimistic here,” he added.
Parliament legislative and legal affairs committee vice-chairman Khamis Al Rumaihi backed the report's findings.
"The drop was sped up by the unrest unfortunately, but it doesn't mean that the rates will remain at 50 per cent forever," he said.
"With a political solution that pleases all, the market will get refreshed. Within a few years it will reach its highest peaks considering that the standstill can't continue forever."