Property market operators warn that house rents could soar up to 20 percent a year from 2015 if the rising demand fuelled by a heavy influx of foreign workers is not met.
Excessive housing supplies are keeping the rentals stable at the moment, but the swelling expatriate population could gobble up the surplus faster.
“So the authorities must focus on creating housing supplies to meet galloping demand,” said Mansour Al Mansour, businessman and real estate expert.
“If that is not done, I am afraid rents could rise up to 20 percent a year, especially from 2015 until 2022,” he added. “Supplies are excessive now, but they are being exhausted fast.” Al Mansour hinted that excessive supplies could last until 2014-end but added that given the heavy influx of foreign workers, rising demand could put pressure on supplies. “So the authorities need to be alert and make sure the demand is met as it is generated.”
Another businessman and expert, Hassan Al Hakim said the authorities should learn from the experience of 2006-08 when rents touched historic highs, pushing inflation sky-high. “We could see a repeat of 2006-08 if effective steps to address the housing situation are not taken. As we know, high rents were the single largest contributor to price rise then.” According to Al Mansour, the demand for housing could begin jumping from the current quarter (October to December) as several key development projects are being awarded.
The tendering process for many of those projects, allocations for which have been made in the state budget for the current fiscal year (2013-14), is over.
“Some of them have already been awarded while others are to be awarded soon — all in this quarter.” House rents would likely be stable this quarter and the next year due to excessive supplies. “But the situation would change drastically in 2015 due to a heavier workers’ influx,” reiterated Al Mansour.
Official statistics back the experts’ claims. Real estate transactions have grown more than 32 percent in the first nine months of this year over the same period of 2012, reflecting that the demand has been on an upswing.
The demand remains high for land as developers are focusing on creating more and more housing and commercial stock.
“Land prices have been relatively stable so far this year but surging demand means that the situation would change — and sooner than expected,” said a real estate expert, preferring anonymity. He said the rental market for affordable housing was likely to be affected soon due to huge shortages. “The rents of this segment of housing are already increasing and the trend is unlikely to be checked due to short supplies.”
“The problem is, despite such shortages developers continue to focus on medium and higher-end housing stocks. That doesn’t, obviously, bode well for limited-income people.”
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