If Doha builds it, will they come? Status of Qatar's real estate market
Qatar National Vision 2030 and the FIFA 2022 World Cup preparations are driving the development of the country’s infrastructure and real estate sectors. Of course, the key question remains the sustainability of these developments.
Doha’s residential market experienced robust growth in transaction volumes, sales prices and rental prices led by high-end areas such as West Bay and the Pearl. Key drivers behind this trend are the high population influx on the demand side and ongoing shortage of housing on the supply side. Average rent went by 16 per cent year-on-year in Q3 2013 reaching a three year high while still remaining 27 per cent below its peak value in 2008. This gap is expected to decrease within the next two years with the continuing undersupply. In the medium term, this situation is expected to ease up with several new developments in the pipeline over the next three years such as at The Pearl.
In Doha’s office market, development activity remained high despite the existing oversupply (with stable vacancy rates of 30 per cent) placing downward pressure on rental fees. The majority of the new units aim to introduce a new level of quality while replacing older existing buildings. The highest volume of new supply is planned for the West Bay district, followed by the Corniche area and the C/D Ring Road areas. In the medium term, demand for office space is likely to increase with preparation for the FIFA World Cup 2022 and the strong economic growth attracting new tenants.
As for Doha’s retail market, insufficient supply has bumped up prices. However, a number of large projects are underway in the next two to three years, likely creating a state of oversupply in the long run.
Finally, it is worth noting that despite the state’s effort to invest billions into infrastructure and real estate development, not all Qatari based developers are benefitting from these injections. Mega property developer Barwa Real Estate posted a 40 per cent drop in net profit for the first nine months of 2013 even after receiving $7.1 billion in support from the state to reduce its debts.
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