Bahrains property market has stabilised during the second half of this year and is expected to settle further in 2017, according to UK real estate consultancy Cluttons.
Despite slowing economic conditions, rental budgets in the residential market continue to outperform expectations. For the office market, the stability borders on stagnation, with Cluttons finding largely no change in rents during the first nine months of 2016. The same can be said for a remarkably sluggish retail market, with rents in this sector expected to hold steady for another six to 12 months.
The stabilisation in rents across the sector is reflective of weaker underlying fundamentals in the market, says Harry Goodson-Wickes, head of Cluttons Bahrain. Economic fragility and the ongoing impact of the low oil price environment have curtailed job creation levels and have dampened overall sentiment, and this will continue to hamper the kingdoms property market during the fourth quarter, continuing into the first half of 2017. The few exceptions where we have seen growth include developments such as Amwaj Islands for the residential market, the Financial Harbour for the office market and Isa Town for the retail market.
Households in Bahrain have been faced with some very challenging headwinds over the past 12-18 months, with subsidy removals and job security fears denting confidence and driving down budgets, says Faisal Durrani, Cluttons head of research. But we appear to be entering a period of stability, with the market flattening out. We had previously expected to see rents decline by 5 per cent on average through the course of the year, but we have now revised up our forecasts for the residential rental market, with little to no declines now anticipated as we head towards the end of 2016.
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The countrys strong non-oil sector will need to expand further to ensure GDP growth
Bahrains economy performed resiliently in 2015, with the non-oil sector, which accounted for 80.3 per cent of real GDP, growing by 3.9 per cent and the oil sector contracting marginally by 0.9 per cent.
Although the GDP growth figures are robust, there are concerns. In May, US ratings agency Moodys Investors Service downgraded its rating for Bahrain to Ba2 with a negative outlook and said it expects the fiscal deficit to widen, with the debt/GDP ratio reaching 100 per cent by 2019. In the meantime, the agency says Manama will find it increasingly difficult to borrow in the international markets. Read more