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Real Estate Prices Reflect Global Supply-Demand Equilibrium

Market conditions have helped mitigate a potential negative impact on property prices

The real estate market in the region witnessed unsteady, hovering rates that have brought landlords tangible yields over the past two years. A state of unsteadiness resulted in surging real estate prices and a remarkable fall in sales due to multifaceted real estate demand, varying impact of financial and economic challenges across all business sectors, and a yawning gap between property prices in top localities.

According to Al Mazaya Holding’s Weekly Report, market conditions helped mitigate a potential negative impact on property prices. In the meantime, the real estate markets in the region did not witness a collapse in rental prices, with the recorded price plummet remaining within rational levels for investors and end-users alike. The report highlighted the criteria adopted on the Saudi Real Estate Market where state-run authorities are heading for design-driven luxury hotels that are subject neither to the demand – supply mechanism nor to the conventional price growth rates. In excess of a 2 per cent fall was posted in the KSA Real Estate Market, with a 20 per cent increase in Jeddah. An annual hike of 3 per cent was recorded on average in rental prices that have been increasing in different proportions for the second year running.  Such a trend has caused landlords to curb the increasing prices of existing real estate investments.

On the Bahraini Market, the Al Mazaya Holding Report indicated that the prices have not been affected by the sharp plummeting of oil prices though the country is largely dependent on oil revenues. The real estate values exhibited tangible growth in the first half of this year, with office rentals remaining stable during the same period. In the meantime, a rental price growth was posted in many locations, thanks to the robust supply-demand mechanism, which is a direct result of the Bahraini Government’s plans to provide Bahraini nationals with decent accommodation. These plans fructified into infrastructure developments aimed at strengthening growth rates across different economic platforms, primarily tourism, trade and industry.

In Qatar, a 25 per cent fall in prices was recorded since the beginning of the year due to real estate oversupply, the report indicated.

Expatriates have multiple and competitive apartment rental options in surrounding areas within the capital’s proximity, with an increasing number of residential units being pumped into the market to meet stable demand levels. The considerable amount of liquidity and the value of ongoing government enterprises worth more than QR 260 billion play a significant role in keeping the market equilibrium in times of recovery and low economic growth alike.

The report termed the current real estate price fall in Qatar as a self-correcting tendency, following the continuous price hikes witnessed all over the past years. Such a decline, according to the report, is likely to beef up demand across all real estate categories, including those currently in supply as well as those to be marketed over the coming period.

In Dubai, the report said that price indications are more realistic and rather reflect, to a large extent, a natural supply-demand mechanism, fair rates and competitiveness. This is attributed, according to the report, to the rich variety in demand sources and to the number of real estate units available. The report added that the rules and regulations governing the official real estate sectors play a fundamental role in maximising real estate yields, ensuring more stability and growth, thanks to the government’s constant follow-up and update of these rules and regulations.

Recorded dates showed Dubai apartment sales prices edging down to 12 per cent on average, with luxurious units seeing a considerable price plummet. Average priced apartments exhibited more flexibility with the market variables, according to the report, with apartment rentals recording a 2 per cent decrease and office rentals maintaining the current balanced prevailing rates.

In Abu Dhabi, the market is witnessing oversupply, while almost all the rental prices remain unchanged. Some units located outside the capital have recorded a fall in rental prices.

The report highlighted the positive social impact of the housing projects being increasingly implemented by the region’s governments for their citizens. However, according to the report, the inclusion of these residential units within the lists of supplied property and defining demand rates and prices accordingly would lead to incorrect indicators and data that might impinge on future plans and consequently might create negative results in terms of investment returns and market overall stability.

Therefore, multiple market-oriented measurement parameters have to be developed in order to define real rental and sale prices, said the report. Maximising real estate sale incentives has become largely dependent on returns indicators, owing to the availability of various investment options at the local, regional and global levels, which makes real estate investments available for all nationalities worldwide.

The report concluded that providing residential units is no longer the only investment incentive, as stable annual returns are becoming a clear favourite with investors. In addition, the decline in rental prices region-wide is still merely self-correcting, as the prices have not yet edged down toward their real levels.