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Al Mazaya Weekly Report says

Oman witnesses economic boom across various sectors

Major projects in tourism & transport sectors enhance real estate demand and generate new opportunities

Oman’s progressive economic growth boosts demand for residential & commercial properties

Al Mazaya Holding in its weekly real estate report said that the stimulus plans and packages implemented by the Sultanate of Oman have played a direct role in providing momentum for the business environment in the country. The investment plans in the Sultanate have stimulated a number of key economic sectors such as the tourism, financial, industrial and real estate with private and public sectors’ efforts at present focused on achieving a package of achievements.

Oman’s GDP is expected to grow better than last year as a result of improved oil prices and the inflation rate is projected to reach 3.2%. Economic diversification and recovery of energy production will be reflected in the improved economic growth of 3.4% by the end of the year compared to 0.7% at the end of 2017.

The tourism sector in the Sultanate of Oman is undergoing a period of recovery and receiving an investment focus that will last for at least 25 years, including more than US$35 billion spending, with the private sector’s share to rise nearly 80% of the planned investments. This is part of the Sultanate’s goal of doubling tourist arrivals to 5 million visitors by 2040. Such an impressive growth should ensure a 6% increase in the contribution of the tourism sector to GDP, providing tens of thousands of jobs for Omanis, with the government seeking to establish 20,000 hotel rooms by 2020 to meet the growing demand and expected a high number of visitors.

Al Mazaya report highlighted the role played by the industrial sector in the Omani economy, saying it contributes 11% to the GDP. There is also a large number of industrial projects which are opening over the coming period. These include petrochemical, iron, mining and food projects across all governorates of the Sultanate. The Sultanate is also preparing for an economic strategic project to establish an industrial city in the economic zone with investments estimated at $10 billion.

The petrochemical industry posted the highest contribution to GDP of the process industries sector, contributing 51% of the value added to the industrial sector in Oman, according to 2016 statistics. The size of investment opportunities within the Sultanate coupled with the official facilities and incentives provided for investors will directly reflect favourably on the performance of the industrial sector and boost its contribution to the growth of the national economy at a time the Gulf petrochemical industry posted the fastest growth in the past few years, raising production by 8.5% by the end of 2016.

Despite the pressures facing the real estate sector in the Sultanate, Al Mazaya Holding report says that the Omani economy is still maintaining its mobility in various sectors including the real estate platform. Industry indicators show that the GDP growth rate reached 5.2% supported by the expansion of the natural gas sector and the opening of the new airport.

The report pointed to the rental market indicators in the Sultanate which are still facing the pressures of decline and weakness as a result of the current deceleration, which has had a significant impact on the level of demand for rental of residential properties, bringing rental prices down by an average of 20% in Muscat, with office rental prices plummeting to an average of 14%. These declines are due to the fall in oil prices which started in mid-2014, therefore, the current prices are about 20% below their level in the third quarter of 2014. It is expected that prices would remain low until the end of this year before starting to rise during the year 2019 driven by a package of development projects, now being established, with the economic growth expected to record 5.2% by the end of this year.

Al Mazaya said that we cannot talk about the performance of the real estate market without addressing the latest decisions issued by the official authorities to allow expatriates and foreigners to invest in the real estate market through real estate investment funds, which are based on financing investment through ownership rights. These funds can serve as efficient income streams while being a tool for developing and managing real estate portfolios.

Al Mazaya stressed that these decisions are likely to engage expatriates and investors in the real estate sector in the Sultanate and stimulate them to contribute and benefit from the current and targeted real estate mobility. These decisions also constitute a qualitative leap for the Omani real estate sector as well as the economy as a whole, given the fact that the Omani real estate market boasts a competitive edge that enables it to draw GCC nationals seeking land and homeownership.

Al Mazaya underlined the importance of providing more economic stimuli to survive the financial pressures created by the decline in oil revenues which requires time to vanish, with the budget deficit expected to continue over the next few years due to insufficient revenues against current expenses. The Sultanate has to apply enabling laws to meet the heated competition at the regional and international levels and exhibit the agility and resilience needed to fulfill demand.

It is worth noting that the Omani economy has been able to cope with economic and financial pressures and to manage the deficit efficiently despite its impact on economic performance as a whole, as the sources of pressure and mechanisms of response and management are not different in the countries of the region. This means that the Omani economy is not suffering from exceptional challenges and that the current oil prices in addition to investment and development plans being implemented to ensure economic diversification will reflect positively on the Sultanate’s economic performance. With regards to the real estate market, the price declines recorded still fall within the correction paths, especially after the price hikes recorded during the last period in addition to the growing supply on the real estate market at the moment.