What goes up must come down: Oman predicts a property crash
The 'meteoric' rise of property prices in the past six years cannot be sustained and experts are predicting a crash of the profitable sector that would leave many investors in the lurch.
Since 2007, the value of plots of land has risen, in some areas by over 500 per cent, and house prices have gone up more than three times their value since then.
As a result, investors have been reaping huge profits from the lucrative sector to diversify their investments in other trades. However, the market is reaching its saturation point now.
"What goes up must come down. It is impossible to sustain the rapid growth in the property market for much longer. It is starting to stagnate because new buyers are now finding the purchasing of lands and houses beyond their reach,- Ahmed Al Ismaily, proprietor of Al Hadeeth Property Investments, told Times of Oman.
The imminent crash is likely to wipe out at least RO100 million in total investments in the next one-and-a-half year, another expert warned. "Many investors do not leave their money in the banks and they no longer have much faith in shares and bonds. Those who have invested in properties for capital growth will see their investments cut into half within the next 18 months. That will take away between RO100 millions and RO150 millions from their investments,- Said Al Saifi, partner of Capital Investments, said.
Restrictions to cut loans
The market has been mostly supported by new buyers who are looking to buy or build their first homes. However, restrictions to cut loans by a third -” from 75 per cent of a borrower's salary to 50 per cent -” leave first time buyers short of funds.
The steep rise of the property market has also pushed it beyond the reach of the common people who are looking to buy, build and rent to augment their pensions.
Al Ismaily said, "Big investors with deep pockets are shooting themselves on the foot. They are building huge apartment blocks that will significantly reduce rents to the prices that prevailed in the mid-1990s. That will slash their returns and reduce the worth of their villas and plots of lands they are putting up for sale.-
He added that with young people unable to raise funds to buy property, they will find it cheaper to rent while they wait for the prices of land and houses to come down.
"We will soon have too many properties available for rent after the completion of these hundreds of new apartments and villas under construction. That will drive rental down and eventually investors will be forced to sell cheaper their lands and villas if they want to attract first time buyers,- Al Saifi added.
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