More than 100 high-rise towers will be built in Doha in the next few years. By 2013, views of the West Bay area will be dominated by at least 180 towers, up from 69 today.

“The Doha skyline changes all the time,” says Ed Brookes, director at the Qatar office of international property agent DTZ. “If you go away for a few weeks and then come back, it is noticeably different.”

The country’s fast-growing expatriate community, which now numbers more than 750,000, has long competed over the limited supply of good-quality villas and apartments, and there has been a fivefold increase in rental rates over the past five years.

Property ownership is concentrated in the hands of a tiny percentage of the Qatari population, and expatriates have only been allowed to buy property in a few designated areas since 2004.

Rent inflation

Doha has responded to the rent inflation by designating new areas where foreigners can buy property.

It is investing vast amounts of seed money to kickstart new developments, through government companies such as Qatari Diar.

International cash is pouring into property deals in Qatar as the country’s investment rating improves, and typical yields of 8 per cent begin to outstrip profits that can be made in faltering European or US markets.

As a result, fast-developing areas with new properties for sale are emerging, such as Al-Khor, The Pearl and Lusail.

When completed in April 2007, phase one of The Pearl, by local developer United Development Company, will provide 31 residential towers built around a circular bay, on reclaimed land to the north of Doha. More than 11,000 apartments will be built in total.

At the highest end of the market, Dubai Towers in Doha will be an 89-floor, mixed-use building, 435 metres high and comprising 237 apartments. Construction of the tower, developed by Sama Dubai, is under way and will be completed in 2011.

Such developments come within Qatar’s 18 ‘Usufruct’ zones, where expatriates can buy property on a 99-year lease.

The biggest of these areas, and the biggest development scheme in Qatar, is Lusail, on reclaimed land north of The Pearl. When completed, the long-term project, developed by Qatari Diar, will house more than 230,000 people over an area of more than 40 square kilometres. The scheme includes a mixture of 50-floor residential apartments and low-rise apartment clusters. Phase one, known as Energy City, will be ready by 2012.

In Doha, regeneration of crumbling and poorly built 30-40-year-old housing stock into mixed-use schemes is under way, and new development is planned on the outskirts of the city near to the new airport, Doha International, which will be completed in 2010.

“There has been substantial investment in new-build mini-cities on the outskirts of Doha, and older parts of the city centre that are up to 40 years old are being redeveloped,” says Bob Hope, northern Gulf director for UK consultant Atkins.

Arup, another UK consultant, is also considering developing a 35-hectare site in the city that is up for “complete urban renewal”.

The next major development site, which investors are anxiously awaiting to come on stream in 2010, is the existing airport in Doha. This will be decommissioned when Doha International Airport opens for business.

Population growth

Price inflation shows no sign of abating despite a two-year 10 per cent cap on rent increases imposed by the Qatari government in 2006, which is set to be renewed in February. The cap only applies if the same tenant stays in the property, so landlords are forcing tenants out, finding occupants and increasing the rent.

Despite the fact that supply is increasing, demand remains high because new housing in Doha is being outstripped by population growth. “There are many new units being built, but when you look at the number of people coming into Qatar, the increasing supply is still not a huge amount,” says Brookes.

In the leasehold residential market, two-bedroom apartments in Doha’s West Bay now cost up to $4,945 (QR18,000) a month. Properties for sale in The Pearl are edging towards $4,670 a square metre.

In the commercial office market, rents are up to $63 a square metre at new developments such as Commercial Bank Plaza.

“Decent office buildings are still fairly rare in Doha,” says Brookes. “Many international firms are still accommodated in secondary areas or villas with a commercial licence.”

More than 70 firms are reportedly aiming to take up letting space in the next six months. Occupancy rates are at 98 per cent, and are expected to go down to 90 per cent when phase one of the Lusail development comes on stream.

Much of the new development is still not accommodating Qatar’s 500,000-plus blue-collar workforce, who earn on average $1,100-$2,750 a month.

While the construction boom has continued, much of the cheaper housing stock has been demolished to make way for it, and in many cases three or four families are crammed into one apartment.

The state has made land available to developers to come up with the first affordable housing schemes and labour accommodation in prefabricated buildings. The schemes are being led by Al-Barwa Real Estate Company, which is 45 per cent owned by the government.

UK contractor Interserve, which operates a joint venture in Qatar with local contractor Gulf Housing, is working on $89m worth of prefabricated housing for blue-collar workers. By being ready-built and simply erected on site, these housing projects will not massively increase the demand for cement, steel and other conventional construction materials, the price of which is continuing to soar.

The government needs to get construction cost inflation under control if it is to sustain the demand for new development. The plummeting dollar, to which the riyal is pegged, has not helped. “The government has tried to keep construction inflation down by subsidising building materials and setting up its own cement batching plants,” says Brookes. “But the price of cement has still trebled three times in the past two years.”

After paying an exorbitant price, contractors then often cannot get materials such as steel into the country quickly enough.

Doha Port does not have the capacity to handle the influx of materials. The government is working on plans for Doha New Port, but it will not be completed until 2015.

Labour costs are also increasing and staff recruitment and retention is tough. Contractors say the government recently relaxed visa requirements, making it easier for contractors to recruit the labour they need.

“It is easier to get labour in now and working conditions are improving to attract a better calibre of labour,” says Keith Ridgeway, managing director at Interserve’s international business .

Despite many new entrants coming into the market over the past few years, the rising standard of building design has led to calls for the best international consultants and contractors to oversee and build new developments.

Learning process

“There has been a shortage of competent contractors,” says Ridgeway. “They have opened doors to all sorts of other companies - Saudi, Omani, Malaysian - with varying degrees of success. There are clients out here who still find a lower price attractive, and it is still a learning process.”

Atkins’ Hope predicts more long-term partnering arrangements between clients, contractors and consultants. “There will be more design-and-build [D&B] opportunities to speed up the process and a lot of major projects have gone that way,” he says. “We have done quite a few D&B’s with local contractor Midmac for Doha International Airport, and we are looking at bidding for others. If clients establish a good relationship with a consultant or contractor, they can trust them to deliver good quality.”

Contract forms are being improved to attract more international consultants, says Hope. “They have looked at more attractive contract terms, such as the use of advanced payments, to encourage contractors and consultants.”

But Qatar’s notorious bureaucracy is still inhibiting construction firms from entering the local market, says Neil Noble, director at Arup.

“Firms looking to work in the Gulf might go elsewhere because it is so difficult to set up the company here because of local ownership rules and bureaucracy,” he says. “It took us 18 months to register, which was frustrating.”

For those with the patience, the rewards are high, says Ridgeway.

Interserve has been working in Qatar since 1996. “When we bought 49 per cent of Gulf Housing in 1996, it had less than 1,000 people,” he says. “Over the past three years, there has been a huge increase in what we do and our turnover has quadrupled. We [now] employ 10,000 people.”

Will the construction boom be sustained to make it worth entering the Qatari market? “People keep asking when the bubble is going to burst, but I can see it going on for quite some time,” says Noble.

Major new opportunities are expected to arise from urbanisation along the 78km four-lane highway between Doha and the main oil town, Dukhan, on the west coast.

Qatar’s bid for the 2016 Olympic Games, which will be considered seriously after its successful hosting of the Asian Games in 2006, will give developers a further fillip, says Hope.

“The Qatari government has put down a marker in the sand for 2016, which sends out a powerful message for anyone looking seven or eight years ahead,” he says.

Key challenge

Government must tackle rampant inflation in the housing market