Stability and jobs lead to a healthy housing market in Bahrain
Even as increased stability and job creation are driving growth in Bahrain's residential real estate market, occupier activity levels in the office market remain low, said an industry expert.
"Although confidence levels are gradually improving, low activity levels in the office market have heightened further by the supply overhang from the growth spurt recorded prior to the global recession," Harry Goodson-Wickes, head of real estate services firm Cluttons Bahrain, was quoted as telling the Gulf Daily News (GDN), our sister publication, in an exclusive interview.
"We expect office rents to remain close to, or at current levels for the remainder of the year, as overall confidence is yet to fully recover."
According to Goodson-Wickes, the hydrocarbon sector remains a significant generator of jobs and therefore tenants, with direct implications for the kingdom's residential lettings market.
"As additional sectors continue to expand, the lettings market is expected to benefit from an expanding tenant base and a gradual improvement in overall demand over the medium term.
"With landlords remaining on the back foot for the time being, we do not anticipate a rental value surge during the year."
Cluttons expects that landlords would remain keen to keep tenants in situ while showing greater flexibility around asking rates.
However, this behaviour will likely further dampen the prospect of any sudden uplift in the performance of the rental market, he said.
In a review of the market, the consultancy found average villa rents in areas such as Amwaj Islands edged up to BD1,450 ($3,821) per month during the first quarter from BD1,400 per month last year.
The steady increase in rents reflects the rising demand for villas in this submarket from families, who are relocating to take advantage of the relatively stagnant rents, while at the same time upgrading to what they perceive to be higher quality housing.
The increased residential market activity has also resulted in an upturn in interest for off-plan properties.
"The new 405-unit Fontana Gardens scheme in Juffair for instance was launched in early February and off-plan prices for the remaining units currently stands at around BD900 per sqm; similar to the rates being achieved in the nearby completed Fontana Towers, highlighting the rising investment appetite, which is being buoyed by the rising confidence in the market," he said.
On the retail front, with the strengthening pipeline of new schemes coming onto the market, he said, including the Dragon City on Diyar Al Muharraq, the ability of rents to cope with the sudden surge in space will be put to the test.
However, Cluttons expects rents to hold steady in the near term, particularly for schemes close to dense population centres.
It has recorded strong demand at The Lagoon and expects the mall to reach full capacity in the near future as retailers rush to capitalise on demand from the rising number of households in the immediate vicinity.
"With developers capitalising on buoyant demand for retail schemes in Manama, Bahrain's retail market remains the best performing sector in the commercial market. A major driver of the strong performance of the retail sector has been the rising number of Saudi weekend-tourist traffic," he said.
Although Bahrain City Centre has dominated the retail landscape since its opening in 2008, Cluttons feels attention has now turned to areas north of Manama, such as Diyar Al Muharraq's BD1.2 million mixed use scheme due to be anchored by Dragon City.
The industrial sector is also expected to perform strongly, especially the new industrial parks close to Khalifa Bin Salman Port.
With road access to Saudi Arabia, and potentially Qatar in the future, Bahrain is well-placed as a logistics hub for the central Gulf, the consultancy said.
Goodson-Wickes said he expects the number of developments and government partnerships in the housing sector to increase in response to the "tremendous shortage of homes for low- to middle-income Bahrainis".
This is expected to deliver further investment opportunities to the broader market, he added.