Rents may continue to fall in Qatar due to an excess supply in apartments, according to a study.
“We expect apartment rentals to suffer from further reductions as the levels of supply continue to increase as new developments come to the market at the Pearl and in the Diplomatic District,” said a study by DTZ, one of the biggest global real estate advisers.
The average rentals for both villas and apartments in Doha have fallen by 20%-30% since the fourth quarter of 2008 in response to supply outstripping demand, it said.
Population growth has slowed over 2009 and as a result the level of new demand for residential accommodation has reduced considerably in comparison to the previous three years, during which the population doubled, with growth averaging 30% per annum, the study said.
Historically the market has suffered from an under supply with rapidly rising demand, resulting in strong rental inflation in excess of 25% per annum, the DTZ said adding the market dynamic is now shifting as reduced demand coincided with an increase in supply, thereby leading to rental deflation over the last nine months.
In parallel with the reduced demand, the level of supply in housing stock is increasing at a faster rate as a number of developments launched in response to the housing shortage are now reaching completion, according to the study.
There is an increasing trend of companies offering housing allowance to employees as part of their salary package. In response to this, landlords of residential developments with multiple units are adapting their leasing strategy and making units available to individuals whereas in the past they tended to
seek corporate lettings.
“Companies leasing housing directly are seeking to reduce residential costs and their preference is for smaller, efficient housing solutions that offer value for money. We expect this to lead to development of smaller average units sizes in the future,” the study said.
The focus for new residential development in the past has been on the three prime residential districts of Doha - the Diplomatic District, West Bay and Al Waab.
DTZ estimates that there are currently 5,600 residential apartments in the Diplomatic District with about 70% of the existing residential stocks consisting of two- and three-bedroom units.
On the outlook towards freehold market, DTZ said there were signs of investor confidence returning this year, as reflected by some of the banks’ promotions and advertisements regarding mortgage products.
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