Key to the kingdom

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Investors, expats and residents are all capitalising on Bahrain's booming real estate market. Dominic Ellis reports on the major developments happening on and off shore in the Kingdom.

You know, we're nothing like Dubai." It's a common refrain you hear when talking to Bahrain property managers. Indeed, with its Saudi-linking Causeway, financial services history, F1 racetrack and strong Arabian culture, Bahrain is unique regionally. When it comes to real estate, however, a plethora of projects are now coming up on and offshore, indicating a Dubai-like penchant for development.

These are undoubtedly boom times for Bahrain's real estate scene and its skyline and waterline are changing irrevocably, with billions now pouring into residential and commercial projects.

Its retail real estate market continues to grow and will account for 7% of the Gulf's Gross Leasable Area (GLA) by 2010, according to Colliers International. Bahrain has 278,000 sq m of GLA in shopping centres in Manama, with an additional 600,000 sq m under construction.

But it is in the residential sphere where the market has been most dynamic, five years after foreigners were first given the green light to freehold ownership. Asteco reported an "overwhelming response" to the launch of its most recent project, the 45-floor Sukoon Tower, with 118 of the 592 apartments selling out in one day.

Managing director Andrew Chambers says it demonstrates the huge interest among the international community in Bahrain's real estate industry. "With Bahrain having sound legislation governing freehold property, international investors are confident of achieving better returns on their investments," he said.

Prices for freehold one-bed apartments in the Abraj Al Lulu Silver Tower start from a reasonable US$177,964 rising to US$231,072 and US$339,968 for a two and three-bed respectively. The top end ‘villa in the sky' costs US$850,000.

The freehold market is being driven by four key factors; GCC and international investors looking to make a quick-fire premium; Saudi-based expats, who want a base in Bahrain and the added perk of receiving life residence with their purchase; medium to long-term Bahrain expats looking to put down roots; and local Bahrainis.

As with Dubai, more residents are considering buying in the face of escalating rents, which shot up 50% on average last year.

But despite the freehold buzz, housing shortages remain a big problem. A key campaign was recently launched to house Bahraini families, with the government wiping out the 40,000-strong waiting list for homes, land, loans and other housing services within three years, under orders from His Majesty King Hamad.

Under the scheme around 8,000 villas and apartments would be distributed to people this year and around 30,000 before 2010.

The rental market is just as hot. Real estate company Abdul Latif Sulalman Al-Nsair recorded 25% growth last year and is planning to invest around US$27-40m in new apartments and villas in the next two years.

"Villa rental sales are growing fastest, particularly in compounds," says general manager Salah Al Nasser. "Prices will depend on the quality and on the location and services, but the trend is upwards. Villas used to cost US$797/US$1,062 a month a few years ago, now the average is US$1,060. Luxury villas start at US$4,000 and go up to US$6,640 for top-end properties.

The biggest issue to tackle is runaway prices, adds Mr Al Nasser. "Some of the developers are releasing freehold sales in blocks - knowing that three months later, they can increase the prices for the same project by another 25%.

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