A steady decline in the number of white collar expatriate employees has hit housing rental market hard in Oman. Rents declined by 10-15 per cent in 2018 compared to 2017.
Since the demand is mainly from these expatriates, their declining number is resulting in stress in rental as well investment properties, according to the March 2019 Property Report from Al Habib, the largest real estate solutions provider in Oman.
Owners who have been quick to adjust the asking rents downwards, and who offer good maintenance services, are enjoying higher occupancies than those who are less flexible on rents and who do not maintain their buildings well,” stated the report.
Location is also a key factor, with rents and occupancies in popular locations, declining less than those in other areas. “The declines are less in popular locations like CBD, Qurm, Al Khuwayr and Ghubra while higher in Wadi Kabir, Ghala, Amerat and the areas beyond the airport.”
According to the company, the demand for real estate is driven by the job market. The total number of expat employees has gone down from a peak of 1,854,880 as on December 31, 2017 to 1,787,447 as on December 31, 2018, a decrease of 67,433 (3.64 per cent).
“However, a closer look at the numbers shows that the number of expats who hold a diploma and above has gone down, in the last two years, from 159,506 to 142,989, a decline of 16,517 (10.36 per cent).
In most cases, enquiries are not from the newly arriving expatriates but from those already in Oman, seeking to move to cheaper or better accommodation. “This has resulted in declining rents as well as occupancy and rental incomes taking a double hit.”
The total number of Omanis in the private sector has gone up from 223,083 as on December 31, 2016 to 251,009 as on November 30, 2018, an increase of 27,926 (12.5 per cent) in about two years. “Oman now produces a number of high school and college graduates every year, and it is natural that they will replace expatriates, especially in white collar jobs.
“We forecast a further decline in rents and occupancies as more white collar expatriate employees are replaced by Omanis. In general, Oman has, among the highest home ownership, in the world. Omanis prefer to live in their own homes, sometimes in extended families, till they are able to buy/build their own houses. It is also common for more than one Omani in a household to be employed while it is less common in expatriate families,” the report stated.
Rents have declined sharply in almost all locations and occupancies are even more of a problem, stated the report. “CBD is the worst affected with major banks shifting to locations that are fast growing. “Rents in CBD are RO2.5per sq m per month and sometimes even lower. In the more attractive areas of Qurm, Al Khuwayr, Azaiba rents are RO5-6 per sq m per month and sometimes below. Filling up newer buildings (even grade A office space) in popular locations is taking years.”
Villas are mostly for self-occupation and one would expect demand to be steady with rising employment of Omanis. “However, the figures indicate there is slackening of demand here too. The latest statistics show that the number of residential building permits, in all of Oman, has declined to 24,149 in 2017 from 31,912 in 2016 and 34,925 in 2015. Surprisingly the drop is steep (more than 50 per cent) in Muscat and Dhofar and less in the smaller governorates.”
With three malls, that are expected to host about 700 outlets, coming up in Muscat in the next couple of years, and with a number of malls opening in Salalah, Sohar, Nizwa and Sur in the last couple of years, the retail sales are stagnating.
“Retailers are struggling to break-even with increasing outlets catering to the same volume. The newer malls will find it challenging to fill up, and collecting rents is not going to be easy from struggling retailers. Some of the mall owners are offering space free on a long-term basis and sometimes providing subsidy for interior fit out.”
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