By Joanne Bladd
Real estate firm says sales boosted by switch from speculative buyers to end users.
House prices in Oman are showing signs of recovery with purchase prices in some areas chasing pre-crash 2008 levels, real estate firm Cluttons has said.
In its latest Oman property market update, the firm said sales within the country’s Integrated Tourism Complexes (ITCs) have picked up, fuelled by a switch from speculative buyers to end-users.
“We consider that confidence has come back into the market with increase sales activity becoming evident,” the report said.
“Demographics have shifted over the last two years from speculators looking for short-term gains to end-users or long-term investors.”
Asking prices are often “significantly in excess” of realistic market rates, but sellers are increasingly willing to negotiate on price, analysts said.
The average sales price for a four-bedroom villa in The Wave development is OR290,000, compared to OR350,000 in the first quarter of 2008, the report noted.
Prices in the Muscat Hills development show a more significant lag, with a four-bedroom villa costing an average of OR410,000 in the first quarter of 2010, compared to OR550,000 in the same period in 2008.
The rental market is facing an ongoing drop in rates, aggravated by an oversupply of residential properties. “Average rental values have fallen and we foresee further reductions as the impact of the over-supply becomes more evident,” the report said.
In Oman’s costliest rental region, Shatti Al Qurum, rents are still deflated. The average rent for a four-bedroom villa in the first quarter of 2010 is OR2,000; some OR900 cheaper than in the same period in 2008.
In Oman’s commercial sector, rents for prime office stock have stabilised after tumbling during the downturn, the report said. However, rents are likely to come under pressure in the coming months as fresh office stock enters the market, and tenants become choosier about locations.
“Tenants are starting to drive a hard bargain when negotiating rents and lease terms,” analysts said. “We anticipate a continuation of rising vacancy levels as supply continues to outstrip demand.
“Suitably located and well-designed office space…will command a premium while we expect that… low-quality office space will show high vacancy levels and reduced rental values. The result will be a two-tier office rental market.”
On the retail front, 100,000 sq m of new retail space is set to enter the market in the next 18 months, in addition to an existing 300,000 sq m of stock.
Though demand for smaller units between 100 to 200 sq m remains high, the appetite for large-scale retail development in the Muscat area may be sated, analysts said.
“We foresee rental rates remaining stable for established retail centers with a high footfall… [however] rental rates for new, large-scale shopping malls are likely to struggle to meet landlords’ expectations.”
Huge housing complexes are coming up in Muscat, Oman. Supply would therefore would be more than the demand which may result into lowering of rent.