A drop in the expatriate population in Oman is likely to put further pressure on the sultanate’s residential real estate sector, according to the latest report from Savills.
The report revealed that a combination of nationalisation and the impacts of the Covid-19 pandemic saw a “significant decline” in expat numbers – with around 320,000 (about 15 percent) fewer expatriates in the country in comparison to 2016.
Expats make up 40 percent of Oman’s population. The report said: “While the Omani population has continued to grow steadily, expatriate numbers started to drop gradually in 2018 and 2019 before seeing a drop from 880,000 to 760,000 (almost 15 percent) over the course of 2020.”
And while it said that that expat population has “started to stabilise over recent months”, it warned that there is the potential for further reductions in numbers due to the long term economic impacts of the pandemic and a growing focus on Omanisation of the workforce, “particularly for white collar positions”.
This, coupled with concerns over increasing oversupply of residential units, is expected to place further strain on the market.
According to the Oman census 2020, there are currently around 80,000 vacant residential units – around 20 percent of the total residential supply – in Muscat.
With the vast majority of Omanis being owner-occupiers, it is estimated that a significant proportion of the vacant units are likely to be investment properties for the rental market.
“As a result of the notable drop in the number of expatriates in Muscat over 2020 allied to the difficulty for new employees to enter Oman due to travel restrictions, demand has seen a notable reduction over the last 15 months,” the report said. “It has been focused to a notable degree on more affordable apartments and villas/townhouses in the more exclusive localities of Al Mouj, Muscat Hills and Shatti Al Qurum.”
Expats make up 40 percent of Oman’s population. Image: Bloomberg
The pandemic and subsequent lockdown measures have also negatively impacted the office market in Muscat.
According to the report: “Almost all new office leases were observed from companies with an existing presence in Oman. Demand remains primarily focused on smaller, fully finished spaces. In contrast to the demand dynamics, recent years have seen the introduction of a significant supply of new office space which has exceeded the limited demand for office space in the city.
“There is currently circa 100,000 sqm of office space under construction, while requirements in excess of 2,000 sqm are extremely rare.”
According to government figures, GDP (at current prices) dropped by just over 15 percent in 2020 in comparison to 2019. The International Monetary Fund (IMF) and World Bank are both projecting that Oman’s economy will show a moderate recovery over 2021 before seeing a notable acceleration in 2022. The IMF’s current projections are then for steady but more limited growth from 2023 to 2026.
The sultanate’s economy is also driven to a significant degree by government spending while, according to the IMF, government revenues dropped by 24 percent from OR11.0 billion in 2019 to OR8.3bn in 2020.
Oman has accelerated its Covid vaccination programme with the intention of over 70 percent of the population being vaccinated by the end of the year.
Encouragingly, the IMF is predicting that government revenues will recover at 15 percent annualy over the next two years to OR9.6bn in 2021 and OR11.0bn in 2022 before stabilising at a growth rate of 1 percent to 3 percent per annum from 2023 to 2026.
At these revenue levels, the IMF is projecting that the government will be able to maintain spending at just under OR12bn per year over the next five years.
Although restrictions are still in place across the sultanate, Oman has accelerated its Covid vaccination programme with the intention of over 70 percent of the population being vaccinated by the end of the year.
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