03 December 2008

* Signs of lower rents in the Gulf

Rents are expected to decline in the Gulf states in the coming months though evidence of it already happening is yet to be visible. At the same time, there are indications that rentals are unlikely to nosedive in the immediate future.

According to reports from real estate agents, the situation is uneven now, with rents in some areas holding up while in others either rising or sliding.

Reg Barichievy, General Manager of Colliers International Qatar, which provides integrated real estate services to clients on behalf of landlords, tenants and investors, said in an interview for Gulf Times that the rents in general were not falling yet.

Quoting the latest research from Colliers, he said: “There is a pent up demand in both commercial and residential demand which means that equilibrium will not be reached before 2011.

“There may be a small adjustment on new sales by way of discounting but we haven’t seen any evidence of falling rentals.”

But, AK Usman, General Manager of Al-Muftah Services, said there was a clear trend of rentals moving downwards. “Landlords are now willing to negotiate. In the past, they never return your calls but now they initiate the call. Previously, the attitude was ‘take it or leave it’. It has definitely changed,” the market veteran said.

Another agent in Dubai said that the position of landlords was softening, especially in relation to villa rentals, and they are now willing to negotiate two or three rent cheques, rather than one rent cheque for the annual rent. One report from Qatar said the rents were indeed falling, mostly in the higher bracket. For instance, a seven-bed villa in Wakrah, which was previously going for QAR33,000 to QAR35,000, was now being offered at QAR25,000. “Rents are negotiable now.”

At the same time, Usman said, existing tenants were being subjected to annual increases, especially if the rents were “reasonable”. For instance, he said, if a two-bed flat had a rent of QAR2,500 or QAR3,000, "chances are the landlords will ask for a 10% or even 15% increase, though it is illegal.”

However, if the rents were already at the “peak”, a further rise was unlikely, he added.

Concurring, another agent said, Asians were more likely to be subjected to this sort of treatment because of their “passive attitude and disinclination to go for litigation”.

According to existing law, no increase in rent is allowed until February 2010 when a new regulation is expected to be enacted.

According to another agent in Qatar, the rents for new properties had already dropped by 10% to 15% and a crash of 50% or more could not be ruled out by next year.

Market analysts line up a number of reasons for such a crash. For one, the availability of nearly 2,000 Barwa budget homes in the market has put pressure on low-income houses.

Besides, one analyst said, banks had started insisting on repayment of loans and this was forcing landlords not to keep their properties vacant but to rent out at whatever rates.

Previously, when banks were flush with funds, they did not insist on immediate monthly instalment payments but were happy to collect just the interest. Now, if instalments are not paid, banks take over the property and rent it out, he pointed out.

In addition, he said, prices of steel and cement too had dropped. This could encourage landlords to take a new look at the rents.

An official of Al-Asmakh Real Estate, however, said the market was holding steady in terms of rents as well as property prices. 

Ramesh Nandan, Al-Muftah Real Estate manager, said the rents were indeed looking down, more so at the higher end of the market. For instance, he said, a luxury villa at the West Bay Lagoon, which was earlier going for QAR40,000 to QAR45,000 a month, was now available for QAR33,000.

Even at this rent, there were no takers as people had adopted a “wait and watch” policy, he said. “They are waiting for the market to stabilise.”

According to him, a new trend was for landlords to deal directly with clients. They were offering flats in a semi-furnished condition to get higher rents.

Property manager at another major estate agency, Apollo Enterprises, P N Baburajan, said the market was indeed quiet but this was normal for this time of the year. January would present a clearer picture when companies would have new budgets.

He said enquires were almost nil now and rents had to drop next year.

Like rents, property prices too were shaky now, said another estate agent. Leasehold flats within Doha suburbs, which were previously sold for QAR11,000 per sq m, were now offered for QAR9,750 to QAR10,250. This meant that a two-bed flat previously sold for QAR1.65 million was now going for QAR1.15 million.

According to sources, which did not want to be named, the decline was substantial in certain upmarket, fancy buildings and plush developments in the country.

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Lebanon Time-Line

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