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Property market in Bahrain slowing but expected to be resilient

However its modest growth should prevent it from suffering a sharp decline like that seen in nearby Dubai where prices are falling by 40% in some locations.

'Prices over the past months have been fairly static, nobody is buying and nobody is selling, there's little activity,' said Mike Williams, senior director at real estate adviser CB Richard Ellis in Bahrain.

He said that property buyers are waiting for the local impact of the global crisis to become clear, while sellers are not desperate to sell, having largely not bought for speculation.

Prices are starting to fall slightly in areas of the capital, Manama which is dominated by expatriates, but were still rising in areas with a high share of Bahraini upper and middle classes, according to Anthony Mallis, CEO of Bahrain-based Sico Investment Bank.

A number of high-end housing and commercial projects are under development on newly reclaimed land in the north of Bahrain, an island with a population of just over one million, but so far no developer has announced any major project cuts.

'Those that are being worked on will be completed, whether they'll be all occupied is another question,' Mallis added.

There are concerns that the slowdown could have an effect on cash flow for developers but Williams said that as property growth in Bahrain has been fuelled by demand from a growing population and an influx of local and regional money, unlike Dubai, which attracted speculators from around the world, the risk is minimal.

In Bahrain, the presence of the US Navy's Fifth Fleet also helps to bolster the local housing market as the US Navy last month decided to allow sailors' spouses to permanently live in Bahrain again, lifting a 2004 ban imposed because of security fears.

'Making this a family posting again will put pressure on family housing for the next two to three years,' Williams said.

While the luxury and middle segment of the market are overall in a supply-demand equilibrium, the lower end has long been neglected by developers. 'There's a massive shortage in the low-income housing market,' Williams added.

New property developer, Naseej said it saw strong opportunities in low-cost housing. The commercial property sector has largely been unscathed, owing to a resilient financial system.