By Dominic Ellis
Investors, expats and residents are capitalising on Bahrain's booming real estate. We report on the major developments.
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%.
I know of one major development where units have changed hands four times and it's still not built.
This was a similar trend during the nascent stages of Dubai's property boom, but then the market stabilised as it grew and appealed to a broader range of investors; in all likelihood, Bahrain will go the same way.
Given its 716 sq km geography, the focus on major offshore developments is as much an imperative as a reflection of ambition, with land already at a premium on the island-scattered state.
But that's not to say more land developments aren't forthcoming.
Among the eye-catching ones coming up are Riffa Views, with the first villas due to be handed over in June. The project is slated for total completion by June 2009.
Riffa Views is residential development which will feature 900 homes built around a championship golf course designed by the golfer Colin Montgomerie.
It will include three neighbourhood clusters, lagoons and waterways and all homes will have open views of the golf fairways.
Some of the most significant developments commercially evolve around Bahrain Financial Harbour, with European major Dexia Private Bank recently signing up to occupy the 23rd floor.
"Bahrain is without doubt the most promising financial hub in the Middle East region and we strongly believe that Bahrain Financial Harbour is the focal point and a perfect platform for all financial sector firms wanting to establish their presence in the region," said Markus Hermanek, Senior Vice-President, Head of the Middle East Branch in Bahrain, Dexia Private Bank (Switzerland).
Property-related financial deals remain in full swing, reflecting the ongoing growth in the market.
Venture Capital Bank will invest US$1bn in the Middle East and North Africa by the end of this year with more than 25% of the investment channelled into Bahrain.
REALCapita, which saw its income rise by 80% last year as the firm moved into the European and Saudi markets, plans a new US$500m project in the near future in a move that will push the company's value beyond the US$1bn mark.
The company claims to have pioneered the concept of ‘green buildings', with its US$200m Amwaj Gateway (three 20-storey towers) being the first project in the Kingdom to obtain a Green Building certificate through adopting the ‘Leadership in Energy and Environment Design' criteria for new builds.
The Porta Reef Fund was oversubscribed on closure late December.
The US$34m fund was launched to source financing for Abu Dhabi Investment House's landmark residential project on Bahrain's US$1.2bn Reef Island. More than two-thirds of total units in the towers have been sold since they were launched in October.
Bahrain's Reef-Real Estate Finance Company and Calyon Crédit Agricole CIB have launched "a groundbreaking transaction" in real estate finance.
Through an Islamic warehousing facility to be refinanced by an international mortgage-back securitisation, the first of its type in the Kingdom, US$150m will be raised to help provide competitive financing for Bahrain property purchases.
With so much activity, it's clear that Bahrain is now unlocking its real estate potential and adding another dimension to the unit-hungry GCC.