The market correction, 2022 FIFA World Cup and government reforms are all a step in the right direction
If someone asks me, “What is the most important factor in today’s Qatar real estate market, I would answer “sustainability”.
In a few words, I will try to emphasise the role of sustainability in the Qatar real estate market and the steps already made towards accomplishing it.
The first step towards building a sustainable market was the price correction that started at the end of 2015. Based on information from the CBQ Real Estate Index, it stood at 227.3 points in September 2019, compared to the peak of 311.5 points in December 2015.
The prices of residential and commercial properties suffered a drop, mainly based on oversupply. With new projects being delivered, clients aimed to move to a better location with different facilities and incentives from landlords at better rates. If in the past, landlords were okay to deal with a short vacancy period, the sentiment has shifted now. As we are approaching the 2022 FIFA World Cup, they are considering taking on tenants at lower rates or offering incentives like rent-free months in order to have the units occupied.
Qatar’s banking sector, the main driver and pillar of the real estate market, remains healthy. As per the International Monetary Fund concluded Article IV, done in consultation with Qatar: “At end-September 2018, banks had high capitalisation [CAR of 16 percent], maintained strong profitability [ROA of 1.6 percent], low non-performing loans [ratio of 1.7 percent] and a reasonable provisioning ratio of 83 percent.”
Another contributor towards building a sustainable market is an increase in demand from small and medium-sized companies based in neighbouring countries to register their offices in Qatar. As this demand was generated in the latter half of 2019, we are seeing a domino effect in the market now. This has resulted in positive market sentiment as businesses are introducing new concepts, food and beverage outlets and facilities for the Qatari market. More companies registered in Qatar will lead to a better occupancy for office and retail spaces. This will also create the need for more employees, who will in turn generate demand for residential units.
In the short term, the 2022 FIFA World Cup will help improve occupancy rates for vacant units. There are also a lot of ongoing projects in the pipeline across all sectors of the real estate market, which will help generate demand.
The government plays the most important role in the market’s sustainability by introducing new regulations. The recent reforms, in terms of foreign real estate ownership and the registration of real estate brokers and owners of offices, aim for a sustainable and transparent real estate market.
With the “blockade” being the main factor for the downward price trend, I believe it will, however, prove beneficial for the market going forward as it gave the sector an opportunity to set a healthy foundation for growth two years before the World Cup. This sporting event has always proved to be a strong driver for growth for all the economies where it has taken place and will again be the main driver for change in the Qatar market.
It is the responsibility of all market participants, either clients, real estate agencies, landlords, government or private entities, to promote sustainability. As the government has already started to introduce regulations for a sustainable real estate market, it is now our role, as private entities, to start implementing them.
This article was published as part of the fourth edition of Property Finder Qatar’s Trends Report