Manama – Decypha: The Bahraini real estate market is one of the extremely strategic markets in the Gulf Cooperation Council (GCC). With the economic difficulties and constant changes across all sectors of the Bahraini economy. The impact of the low oil prices has also created more demand on the real estate sector besides non-oil others, making it one of the most vital sectors currently.
The Bahraini market showed resilience that was expected to cause the year to end with stability, as reported by Gulf Insider. This stability and resilience caused many analysts to reconsider their view of the potential of the kingdom, real estate wise, as explained by a 2016 Clutton's report, titled Bahrain Property Outlook.
"This stabilization across Bahrain's real estate sectors only shows the weakness in the underlying fundamentals in the market as a whole," said Harry Goodson, head of Cluttons Bahrain and Saudi Arabia told Weetas.
Market Overview
The Bahraini real estate industry has blossomed and remained on the rise with great growth rates since the door was opened for foreigners to purchase lands in 1999, according to Weetas. The climax of this growth was during the period between 2012 and 2014. When oil prices dropped down by over 50%, major changes took place in real estate resulting in a significant drop in demand.
"The price growth rates of 20% and 30% per annum became things of the past. Properties could barely hit 10% rise in price, and in only certain locations," Weetas said. Total real estate transactions value in the Bahraini real estate market reached BHD 1.1 billion in 2016, compared to BHD 1.2 billion in 2015.
Non-Bahraini Arabs who made real estate purchases in 2016 represented only 10% of the total transactions of real estate, while the purchases made by Bahrainis were 85%. Their purchases dropped by 12% in 2016, compared to 49% for the purchases of Arabs.
"Bahrainis are the main driver for the market nowadays. The local real estate market is making good performance as demand and supply rates converge," said Nasser Al Ahli, chairman of Bahrain Real Estate Association, according to Weetas.
Sheikh Khaled ben Abdullah Al Khalifa, deputy prime minister of Bahrain, said that the growing confidence in the local real estate market is the result of the government's measures to secure this sector which has been able to develop a good reputation and contribute to the GDP positively, according to Asharq Al Awsat.
Government's Efforts and Policy Changes
The Bahraini government is attempting to rebrand and market the country in order to increase inbound tourism, and this a cornerstone of promoting the real estate market in Bahrain, according to Gulf Insider. Several infrastructures of tourism, including a number of five-star hotels, are currently under implementation. In addition to others that are under development and rebranding, including Al Jazeera Beach, Hawar Islands, and Marassi beach.
The government of Bahrain is seeking to counter the issues that may threaten the stability of the real estate sector. According to Weetas, the government is creating a clear framework for real estate activities, and as part of its attempts, in mid-2014, it issued the property development law which aimed to guarantee and protect the rights of both buyers and owners as well as increase the confidence of investors in the Bahraini real estate market. "Despite the issuance of the executive regulation and orders necessary to implement the provisions of the law, it’s still vague for many developers and the law hasn’t been fully applied in reality." Weetas reported.
The government has also sought to solve the problem of halted real estate projects, and in 2016, it created a ministerial committee specialized in looking into stalled projects and solving their issues. The result is some projects are currently awaiting the continuation of construction and development works.
Challenges vs. Opportunities
The residential sector holds opportunities for investors, bringing out the advantages Bahrain has over other GCC markets, with the retail and hospitality sectors rapidly growing and the commercial office market seeking to grow with a relatively weak demand, according to Impact Estate. "The residential sector is offering potential investment opportunities, supported by a low real estate cost base, attractive business costs and Bahrain’s popularity as a place to live for MENA and western expatriate families and bachelors,” Impact Estate reported. The compound villas sector also looks promising with high occupancy levels in areas popular with expatriates.
The commercial office market is facing challenges, on the other hand, with 'downside risks again appearing on the horizon'. Budgets to fund ministry office projects may also be affected by the widely discussed cuts in short to medium-term government spending.
Main Market Players
Some of the main real estate companies in Bahrain include Diyar Al Muharraq, a major company developing Bahrain's second largest artificial island, named after the company according to Weetas.
Naseej is another main player in the market. It has become a perfect model of a successful partnership between the public and private sectors after a number of private and public entities came together to form Naseej in 2009.
Durrat Al Bahrain is another master developer based in Bahrain and owned by the Kuwait Finance House (KFH) and Bahrain government. It manages the work of Durrat Al Bahrain island, the third largest artificial islan in Bahrain.
Durrat Marina is major company currently working on a $1.3 billion worth project aimed to become a destination for luxury and relaxation in the country.
Ithmaar is a real estate affiliate of Bahrain's Ithmaar bank, and was established back in 2007. It was able to introduce new residential concepts for the first time in Bahrain and the GCC.
Manara Developments is one of Bahrain's top real estate companies that was able to join the other major companies very quickly.
Seef Properties also comes amongst the list of the main Bahraini real estate players. It is one of the oldest companies in Bahrain, being a public company established back in 1999 with a large portfolio of 450 properties in the various real estate sectors.
Potential Outlook
The real estate demand in Bahrain in 2017, according to population statistics and typical household sizes, is for 290,000 units, however, there are only 216,000 completed units in all kinds of property within the market, according to Trade Arabia. A strong strategy lead by the government is underway to bridge the supply and demand gap with 40,000 units planned to be introduced within the government's housing plan by 2020.
"Areas popular with expatriates for both apartment rental and sales continue to be Juffair, Seef, Amwaj and Reef Island. One of the most active districts of Bahrain for new residential development is Juffair, where there are a number of large-scale residential tower projects under construction and planned for completion in 2017 and 2018," James Lynn, the director of CBRE Bahrain told Trade Arabia in comment on the residential sector.
A significant increase is expected to take place in the freehold supply over the next two years in the area of Juffair specifically. In 2016, the micro market had 2,800 freehold units and the number is expected to jump to more than 5,000 units by 2018 which is nearly a 79% growth in a period of two years, Trade Arabia reported.
"In terms of future supply of hotel rooms in the development pipeline, there are an additional 5,100 rooms planned to be introduced by 2021 in the five-star category which will further advance the standard of property in the Bahrain market,” the report highlighted.
By Reem Hosam El-dein
