Real Estate & Construction
The number of real estate transactions completed in 2013 grew by 3.26% to a total of 8,481. Again, a meager increase when compared to 2012, when the number of property deals nearly quadrupled. Nearly half of all property deals concluded in Qatar concern the capital Doha.
The 2013 growth figures were rather humble when compared to 2012, as skyrocketing land prices discouraged investors, concluded a Roots Real Estate report issued in early 2014. Furthermore, the phenomenal growth recorded in 2012 was to a large extent a market correction. It should be seen in the perspective of the 2008 global financial crisis, as a consequence of which property prices in Qatar saw a sharp decline. In fact, current prices have still not reached the peak levels prior to 2008.
“The outlook for the Qatari real estate market is extremely positive,” said Mirko Maurer, Managing Director of Engel & Völkers Qatar. “After the decision in 2010 to award Qatar the 2022 FIFA World Cup, everybody was expecting huge projects to go ahead in 2011 and 2012. Although this is going a bit slower than expected, they will come to pass. We have seen many more requests for apartments, villas and office space in 2013.”
Real estate advisers Asteco in its 3Q2013 report signaled, among other things, that Qatar’s increasing expatriate inflow had led to an average annual rental increase of 16%. Two-bedroom units in The Pearl, for example, witnessed a 9% price hike compared to 2Q2013.
A two-bedroom apartment on average costs some $3,800 a month, making it arguably the most expensive address in Doha. A similar-sized home in the West Bay area costs an average of some $3,200 a month.
According to Asteco, the villa rental market continued to outperform the apartment rental market. A four-bedroom villa in West Bay cost an average of some $7,500 a month, up 16% year-on-year, while the areas of Ain Khalid and Al Waab saw average annual rental increases of 18% and 15%, respectively.
A survey published by the Emirati company Cost of Living Reports (CLR) went viral in January 2014 when it concluded that Qatar was the most expensive city in the Gulf region. It compared a variety of living expenses from school fees to food prices. The most expensive element in Doha by far, according to CLR, was the rental of an upmarket two-bedroom apartment at $42,930 a year, some $15,540 more than in the UAE, the region’s second most expensive location.
However, while Doha may very well be the Gulf’s most expensive city, the survey has been criticized for presenting an extreme scenario. Doha is larger than The Pearl or the West Bay, and outside these areas it is certainly possible to find an apartment for less than $3,000 a month. In similar annual surveys such as the annual Mercer index, Doha still ranks below such cities as Beirut, Abu Dhabi, and Dubai.
Most foreigners rent an apartment, not only because they are often only temporarily based in Qatar, but also because their options to buy in Qatar are limited. They can only buy freehold property in The Pearl, the West Bay, and Barwa’s (on hold) Al Khor project, while 18 other areas offer leasehold rights. One benefit of buying freehold in Qatar is that it comes with a free residence permit.
“Freehold is still limited to The Pearl and West Bay,” said Maurer. “The first residence visas have been issued to owners, which is helping to bring some investors back to The Pearl. But the law specifically applies to freehold properties. We do not see many foreigners investing in leasehold properties.”
The main market drivers are Qatar’s ongoing construction boom and the country’s rapid population growth. Qatar is constructing a series of large infrastructure projects, such as the Doha metro and a new port. In addition, such mega-projects as Lusail City, which will eventually house 200,000 people, are being built.
Such activities and ambitions have attracted large numbers of skilled foreign workers. Qatar’s population since 2008 has grown at an average annual rate of 4%, to around 1.8 million inhabitants by end-2012, 86% of whom were expatriates. Annual population growth is expected to amount to 7% within the next few years.
Doha’s most prestigious and expensive business address remains the West Bay district, where the average rent amounts to $50 to $60 per sqm annually. Many of the West Bay towers are occupied by single tenants, mostly government institutions and leading multinationals.
Because of the steep rental rates and the fact that the West Bay predominantly offers large-sized office space, many foreign firms prefer to rent a villa and use it as an office. Most realtors in Doha confirm there is a growing demand for smaller office space.
“In the office market, the development activity in Doha remained high, despite the current situation of oversupply, placing downward pressure on rental fees,” Asteco concluded in its 3Q2013 report. “The majority of new units are of better quality than older buildings. The highest volume of new supply is planned for the West Bay district, followed by the Corniche area and the C/D Ring Road areas.”
Arguably the biggest commercial project currently being constructed is the $3 billion QP District. Situated in the West Bay, it consists of nine office towers and a hotel that will add some 700,000 sqm of commercial space to the market. Construction started in September 2013 and is due to be completed by early 2017.
Other major commercial projects include the West Bay’s $1.5 billion Doha Convention Center Tower and Energy City, or which infrastructure was completed in 2013 and which will see developers start building in 2014. Meanwhile, The Pearl Qatar in 2013 announced signing a $218 million contract to build the Abraj Quartier Gateway Office buildings, which will add up to 230,000 sqm of commercial space to the market by 2016.
Although demand for office space will remain high in the years prior to the 2022 FIFA World Cup, many experts fear that sooner or later oversupply will be the result.
The retail sector is set to grow exponentially over the next few years. A survey by the consultancy firm Tamween concluded that there were 14 malls in Qatar by mid-2013, while there were another 14 major malls announced or under construction, which would add 1,158,000 sqm of Gross Leasable Area (GLA) to the market.
Currently, Qatar’s biggest and most popular malls are Villagio, Landmark, and City Center, yet they will soon be dwarfed by the $820 million Mall of Qatar (MoQ) and $1.6 billion Doha Festival City (DFC).
The MoQ will add some 400,000 sqm of GLA to the market and is scheduled to open in 2016. Once completed, the mall will certain 400 shops, including four department stores, as well as a fashion-themed hotel. In March 2013, the 32,000-sqm IKEA store opened. The famous furniture and home appliances store is one of the anchor tenants of the under-construction DFC. By 2016, the DFC will add 260,000 sqm of GLA to the market, as well as a major cinema and entertainment center.
According to DTZ real estate consultants, Qatar provided 0.3 sqm of retail space per capita by end-2012, which will rise to 0.8 sqm per capita once all new developments are completed.
Speaking to Arabian Business, MoQ Deputy Managing Director Shem Krey warned that Qatar aims to take over Dubai’s crown as the region’s leading retail hub. While Qatar surely has the potential to attract a larger slice of the regional retail pie, and thus many large projects underway over the next two or three years, the potential for a demand/supply mismatch.
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