With near-record inflation and the US Federal Reserve continuing to cut interest rates, Qatar has decided to freeze all rent prices for two years. The freeze applies to any and all rental contracts that were signed since the year 2005. The move is largely in response to the fact that Qatar’s currency peg is to the US dollar which forces it to track the monetary policy of the United States.
As the Federal Reserve continues to attempt to avoid recession, the Gulf markets are experiencing a five-fold increase in oil prices, which is aggressively fuelling inflation. The Gulf Times reported recently, citing a decision made by the Cabinet on Sunday, “No increase in rents shall be permissible for two years for rental contracts signed after January 1, 2005, including new contracts.”
Without many other avenues of combating inflation, the rent caps have been an effective measure, if not relatively small, at helping to reduce inflation of some of the other Gulf states. However, it is understood by everyone involved that it is not a long term solution, especially with supply falling short of the demand. The regional economist at EFG-Hermes investment bank, Monica Malik stated, “This will have some impact on dampening rental price inflation, but with such a supply-demand mismatch, the main thing that will solve the problem is housing supply, which takes time.”
It is not certain exactly how this will affect the property investment market, but for new rental developments and properties, the rent caps will not apply. Unless in this case, the rent cap is extended beyond the two years, any new developments that come online will be signed at the current market rates, and then be up for negotiation after the two year period.
Qatar and many of the other Gulf nations are forecasted to experience relatively active and robust real estate markets this year so there is little expectation that this move will cause a slowdown in developments. However, the concern is that depending on any other substantial policy changes in the region, the property investment market could go south relatively quickly.
