Gov't plans may need to be altered to better reflect demand, says CBRE
Bahrain’s rising land prices are hurting the Gulf state’s drive to tackle its chronic affordable housing shortage and deterring developers from building low-cost homes, real estate analyst CBRE has said.
The Gulf state has a shortfall of around 50,000 affordable homes but developers are being hampered by lack of access to mortgages and the high cost of land, CBRE said in its quarterly market overview of Bahrain’s real estate market.
“It remains difficult to address the needs of the ‘affordable’ market for a number of reasons. Site assembly and infrastructure are often complex, land prices remain completely out of line with commercial realities, government regulations often do not allow creative solutions from the private sector and mortgage finance remains expensive,” said CBRE.
“At present, this sector remains largely off the development radar, with developers either engaged in middle or high-income building projects or seeking to assist the government in its programme of social housing projects,” it added.
Gulf countries are facing a severe shortage of low-cost housing for their growing populations but many have ramped up spending to meet shortfalls in the wake of the Arab Spring. Bahraini authorities said in December the country will allocate up to US$1.51bn for 16,000 new homes.
The GCC Marshall Financial Support fund, a Gulf-wide initiative aimed at helping Bahrain meet its development needs, will go some way to meeting the shortfall but it will be years before plans come to fruition.
“Most of the government’s expenditure in attempting to resolve the 50,000 strong housing waiting list problems will be derived from the US$10bn GCC Marshall Financial Support, but this number of units will take many years to complete as the waiting list continues to grow,” noted CBRE.
“The social housing problem is the inevitable result of demographic pressures increasingly building in the low-income sectors of the Bahraini population, and it may be that the promises originally made on the basis of an entirely different demographic structure may well have to be revisited by the government,” it added.
Bahrain has been in turmoil since protests erupted in early 2011 led by majority Shi'ite Muslims complaining of discrimination in the electoral system, jobs, housing, education and government departments.
The Gulf state’s property market has been negatively affected by the social unrest but is starting to show some signs of recovery, said CBRE. Activity is picking up in the apartment sector and rental rates have stablised in most areas.
Despite the renewed optimism, occupancy and rental rates in compound locations declined slightly in the fourth quarter of 2012. “This combination of factors appear to indicate that the troubled political environment in Bahrain is making the kingdom less appealing for expatriates with families with the shortfall being taken up by expatriates on bachelor status,” said CBRE.
Investors and end-users remain cautious about purchasing buying off-plan apartments following a number of failed projects, the report added. “Investors or end users will be extremely cautious when buying off-plan in this environment, and will return to their caution of a decade ago, when buyers only bought what they could actually see.”