Oman’s GDP is set to grow at 5.2 percent in 2018, after the country commenced natural gas production and opened a new airport in Muscat, a new report by property consultants Cluttons has said.
The strongest growth rate since 2015, will help steady the country’s property market, research said.
Government efforts to diversify revenue streams and ramp up reforms, have also driven positive growth, Clutton’s Muscat Winter 2017/18 report shows.
The start of natural gas production at the Khazzan gas field and the opening of the new Muscat airport have been the main drivers of new economic opportunities, Head of Cluttons Oman, Ian Gladwin, said.
“Although the real estate market has been impacted by a reduction in overall demand, there remain pockets of activity and clear opportunities in both the residential and commercial sectors.
“The airport, which will nearly double passenger capacity to 12 million passengers per annum, is expected to boost the country’s tourism and hospitality sector, while also opening new development opportunities for land parcels around the airport,” he added.
A weak economy has also dampened demand for residential rentals in Muscat, the report indicates.
Job losses and housing allowance reductions also appear to continue, to a slightly lesser extent than the year before, it says.
Nearly all 12 main residential submarkets monitored in the Omani capital have seen relative stability over the past year, says Faisal Durrani, Head of Research at Cluttons.
“That said, our analysis shows that the premium residential locations across the city have seen the largest drops in rental values as tenant demand has increasingly focussed on more affordable locations and properties.
According to Cluttons report, office rents have seen limited declines through 2017.
Over the course of the last 12 months, the Commercial Bank of Dubai (CBD) has been the city’s weakest performer, with rents dipping by 14.3%.
Despite the declines, occupants seem reluctant to relocate, often deterred by the expenses associated with a move.
“Although we expected landlords to offer greater flexibility due to the stagnant market conditions, this has failed to materialise en masse. In contrast, absorption has been reasonably strong for recently completed, higher quality developments where landlords have taken a more proactive approach to attracting tenants, particularly in terms of offering competitive rental rates.”, said Gladwin.
Outlook for 2018
While Oman has not yet declared the date for the formal roll-out of VAT, Cluttons researchers say the likely impact of the new tax would be a spike in inflation, which may dent consumer confidence and spending.
“The impact on the property market is still unclear, but if the Sultanate follows in the footsteps of the UAE by taxing all commercial sales and lease transactions, demand is likely to weaken further, driving down rents from their current record low levels.
He adds that: “Should Oman follow the Saudi Arabian authorities’ decision to tax buy-to-let residential property, we may see a sudden weakening in the buoyant second homes market”.
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