By Peter Alagos
Business Reporter
Steady growth in Qatar’s real estate market is expected to continue well beyond 2015, according to a forecast made by Oxford Business Group (OBG).
In its 2015 report, OBG said rapid expansion in Qatar’s real estate market in 2014 was driven by a growing population, shrinking average household sizes, and a shortage of available units in the residential sector.
“Determined to develop the industry sustainably, the government moved in 2014 to introduce legislative reforms aimed at strengthening stability and market confidence, while sound economic fundamentals and a host of major infrastructure projects launched under the auspices of the Qatar National Vision 2030 (QNV 2030) are expected to boost the office and retail sectors well beyond 2015,” OBG said.
Citing the Qatar Central Bank’s (QCB) June 2014 real estate price index (REPI), the QCB reported that in the first six months of 2014 REPI rose 21.5%, compared to an uptick of 6.2% during the second half of 2013. Between September 2013 and September 2014, REPI expanded by 43.5% and closed the year at 255.6, up 35.7% from end-2013.
OBG reported that demand for residential units has led growth in the real estate market, though rapid inflation in rental rates and land prices pose considerable challenges to sustainable long-term expansion.
“Colliers International has forecast that residential demand in Doha will continue to grow over the short and medium term, highlighting that occupancy rates across the city are roughly 85%, with luxury gated communities standing at 97% occupancy, indicating ongoing demand at the top end,” OBG said.
The report also cited land prices playing a role in rising rent costs. In an April 2014 report, Roots Real Estate director Ahmed al-Arouqi noted that Doha’s land prices saw a 500% jump between 2010 and 2014. Similarly, QNB in a September 2014 report said land prices rose 52.7% during the first six months of the year.
In the office market, OBG said Colliers International have estimated grade-A office supply in Doha at 2.5mn sq m at the end of 2013. DTZ reports that an additional 300,000sq m of new stock will come on line in West Bay and the Marina District in Lusail in 2015, noting that the market also offers 134,000sq m of vacant prime accommodation.
Colliers International projects cumulative demand to rise to 3.4mn sq m by 2019, while DTZ projects that average office rental rates will continue to increase into 2015, from present levels of around QR250 ($69) per sq m, OBG said.
“Although rental and land price inflation pose challenges to future growth, legislative reforms aimed at avoiding the pitfalls of an overheated market should help keep the industry on a steady path,” OBG said.
In April 2014, Qatar promulgated Law No 6 of 2014 or the Real Estate Development Law, which regulates developers. Article 7 of the law establishes a requirement to commence and complete construction works specified in sales agreement and purchase contracts, which should help the market avoid crashes like those witnessed in the wake of the 2009 financial crisis.
Under the new law, any entity carrying out real estate development must obtain a developer’s licence from a designated department within the Ministry of Economy and Commerce.
