Report blames weakening economic conditions, tapering off in demand for oil and gas, and an increase in real estate supply
Weakening economic conditions, tapering off in demand for oil and gas, and an increase in real estate supply has led to increased pressure on the Bahrain property industry, according to consultancy Cluttons.
The result is a market defined by increased incentives, adjustments and service quality from landlords and developers as they fight to remain competitive in the market, it said in its Bahrain Spring 2017 Property Market Outlook report.
Cluttons said that the relative stability of residential rents across the kingdom’s key expat dominated submarkets appears to have ended following a largely flat 2016.
It added that 2017 has marked a change in conditions, with rents retreating across the board during the three months to the end of March.
In real terms, this equates to a monthly fall of 8.3 percent for apartments and a 6.9 percent drop for villas, both experiencing the fastest rate of decline since 2009 during Q1.
Faisal Durrani, head of research for Cluttons said: “Weaker economic conditions alone are not to blame for the correction now underway in the rental market in Bahrain. There has been a surge in the number of new residential developments being sold in the market, most of which are being acquired by Bahraini, or other Gulf investors.
"A significant amount of this stock is filtering through to the rental market which is pushing supply ahead of demand– albeit with a significant upside for renters and occupiers.”
In the sales market, more than 4,100 units are slated for completion in the upper end of the market within the next two years. By 2020, over 7,100 units are expected to be added to the existing residential supply, Cluttons said.
It added that the knock-on impact on sales prices from the sudden boost to supply "appears yet to materialise", with residential values holding steady and remaining unchanged for six consecutive quarters.
The Cluttons report forecasts that a correction in residential values is highly likely, particularly if the sales supply pipeline continues to expand unchecked at current rates.