Short term growth for Oman property market sluggish, consultants believe
International uncertainty and market volatility is still affecting the property market in Oman but growth prospects are improving for the longer term and the sector is expected to rebound slowly over the coming years.
According to a new analysis from Cluttons, the real estate specialist that has enjoyed a dedicated presence in the Middle East since 1976, there are signs of increasing stability.
In its Oman market reports for the first quarter of 2011, which cover the residential and retail sectors within the Sultanate, new tenant housing budgets have seen a decrease of 25% to 30% from previous years.
It also shows that villa rental figures have softened since the last quarter of 2010 to an average of 1100OR per month for a four or five bedroom villa in central/western Muscat. While outlying areas such as Bowsher and Mawaleh have increased in popularity driven by lower prices and improved road access to central areas.
Also Integrated Tourism Complex (ICT) projects such as The Wave and Muscat Hills remain in demand due to the quality of housing and modern design.
‘There are some signs of increasing stability in the residential leasing market but further softening of rental values can be expected in the short to medium term, particularly as the supply of new apartments comes into the market. The long term outlook is that the market should start to show signs of recovery as the economy continues to expand,’ the report says.
Cluttons notes that positive growth in the number of tenants seeking housing results from both new employees coming into the country as companies expand and existing residents seeking better areas or larger properties for their money.
The report also highlights that there has been a notable change in tenant demand trends over recent years. The average housing budgets are lower and many tenants are offering significantly lower than listed rates whilst continuing to expect the highest of standards. On average, new tenant housing budgets have seen a decrease by 25 to 30% from previous years, which have resulted in tenants having to search harder and further afield to meet their expectations.
‘Overall there has been a continued growth in available housing but the design and quality of housing has not necessarily progressed to meet tenant requirements. As the market changes, property types will need to shift with tenant demands and developers will need to build more modern housing aimed at the consumer's wants and needs. Cluttons foresees a two tier market developing between well-designed properties suited to tenant requirements and properties which are poorly designed or built,’ the report also says.
‘The population of Oman has grown with approximately 73% of the population now living in urban areas. The result has been an increasing need for housing designed for and affordable to the local population in western areas of the city such as Al Khoud and Seeb. Several developers have picked up on these trends and there is increasing development of affordable housing in these areas, which is boosted by the recent opening of the Muscat Expressway which has improved travel times to the more established, central parts of the city.
‘Affordable housing is generally priced at RO300 to 320 per square metre, which has led to strong market interest and sales. Properties priced above this level have struggled in comparison. Cluttons expects to see further expansion in this nascent sector,’ it adds.
The pace of development in the retail sector has slowed significantly, and Cluttons notes that it would appear that the appetite for further large-scale retail space has been sated to a large degree in the short to medium term. Reasons for this include the fact that levels of per capita disposable income are relatively low in comparison to other GCC countries, and that Muscat is not seen as a shopping destination, unlike Dubai.