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Economic downturn likely to have limited effect on Bahrain property sector

In Bahrain speculator activity has been restrained compared with places like Dubai and although the real estate sector will be somewhat stunted by current economic conditions it is unlikely to see a massive downturn, analysts believe.

The impact of the credit crunch is likely to be limited and when improved real estate sentiment returns it will be a natural stimulant for future price growth, according to Mike Williams, Senior Director of CB Richard Ellis Bahrain.

'In Bahrain speculators have tended to be a little more cautious and have not extended themselves anywhere near as much as in the UAE where real estate has increasingly been viewed as a one-way investment bet,' he explained.

'The majority of new homes in the Kingdom have been bought by owner-occupiers and the few speculators in the market have typically bought with some caution and with an eye on what housing costs realistically should be,' he added.

He pointed out that as the cost of finance in Bahrain is not cheap and the Kingdom has not been subject to the headlong investment scramble experienced in markets like the US, UK and the UAE, this has created a natural brake on property price increases in the residential and commercial.

'In the short term, yields have improved for investment products, house prices are reasonably stable but some speculators will be forced to sell – probably at a discount. Selling now would be unfortunate as we see significant potential for the real estate market in Bahrain once we have made it past the current slowdown,' he predicted.

Andrew Chambers, Managing Director of Asteco, believes that the market in Bahrain is now providing a prime opportunity for investors to purchase good value, quality projects in the country.

'The current economic climate has undoubtedly affected markets in the GCC region because of the tightening of credit availability. As a result, sales transactions have stabilised as investors are proving hesitant to enter the property market during these challenging times,' he said.

'However, Bahrain is well-positioned to overcome the current economic downturn and this scenario should be regarded positively as a good time for a market correction to take place,' he added.