Rising quality and affordability to reinvigorate Qatar’s real estate market

DOHA: ValuStrat Qatar, leading consulting firm announced yesterday it reported increased real estate transactional volume and market corrections across all sectors in Qatar during the third quarter of 2018. Rents in residential and office sectors became increasingly competitive.

Pawel Banach MRICS – ValuStrat Qatar General Manager commented “…Market corrections continue this quarter as rents and prices continue to fall due to oversupply prevalent across all sectors. It is expected that increasing affordability and quality of delivered properties could reinvigorate the market. Real Estate transactions worth QR 17bn were signed during the first nine months of 2018 indicating a 14 percent rise in volume compared to 2017.”

“As we approach the end of 2018, we expect the market to reveal additional investment opportunities due to various regulatory incentives announced by the government to attract foreign investment. This along with the completion of infrastructure developments to augment World Cup preparation is projected to aid Qatar’s real estate horizon to broaden in the medium term…”.

Qatar’s Residential ValuStrat Price Index (VPI), where a 100-point base was set in Q1 2016, stood at 75.8 points.

Residential unit prices fell because of rising supply, subdued population growth and increased borrowing costs. Countrywide residential capital values declined by 19.5 percent compared to the same quarter in 2016, 10.7 percent compared to Q3 2017 and 2.2%, compared to Q2 2018.

Weighted average value of a residential unit stood at QR8,434 per sq m. More specifically, apartments were QR12,208 per sqm and villas stood at QR6,555 per sqm.

Capital values of freehold apartments fell by 3.2 percent on a quarterly basis, while villas fell by 2.2 percent QoQ. Villas in certain clusters of Al Wakrah/Wukair, West Bay Lagoon, Al Dafna and Al Thumama experienced declines of up to 8 percent quarterly.

Citywide residential asking rents declined 12.4 percent over the past 12 months and 3.9 percent since the first quarter of 2018. Increasing supply continue to put downward pressure on apartment rents, as it reduced by 10.9 percent on an annual basis and 4.2 percent quarterly.

Similarly, corrections have been observed in the villa market, as rents declined by 20.5 percent compared to the same quarter in 2017 and 2.3 percent QoQ.

In Q3 2018, gross yields averaged 4.9 percent for all residential unit types.

“Villa yields this quarter fared better compared to apartments, as rental rates dropped at a slower rate than that of capital values. Areas such as Ain Khaled, Abu Hamour, Al Thumama, Al Dafna, Duhail and Al Wakrah saw average gross yields to increase to 4 percent from 3.6 percent since 2017.

For apartments, The Pearl experienced a rise in yield from 6.3 percent to 6.5 percent over a period of one year…” said Anum Hasan, Market Research Analyst at ValuStrat.

Residential supply reached 288,735 units as of Q3 2018 with the delivery of 635 apartments and villas in Al Mansoura, Lusail, Al Thumama/Al Wukair, Umm Salal, and Al Sakhama. Projected completions for 2018 have been reduced from 12,800 units to 10,600 units due to delayed deliveries.

With the addition of 26,000 sq m Gross Leasable Area (GLA) during Q3 2018, office supply reached a total of 4 million sq m of leasable space. Due to delays in construction, projected supply has been reduced to 600,000 sqm from 720,000 sqm. Market conditions continue to favour tenants as office asking rents dropped 16.8% compared to 2017 and 3 percent against Q2 of this year.

Industrial space was estimated at 16.5 million sqm as of Q3 2018, anticipating a 25 percent increase in supply by 2019. Addition of rent-regulated warehouses is putting downward pressure on rents in Doha Industrial Area. Average asking rent for cold storage leased on per unit basis ranges from QR10,000 to QR15,000 for sizes of 50-80 sqm.

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