Qatar banks set to struggle amid real estate exposure

Landmark Advisory report claims outlook is 'gloomy' due to past excessive lending.
Qatar banks set to struggle amid real estate exposure
By Alex Delmar-Morgan
Mon 08 Jun 2009 02:54 PM

Qatari banks will struggle this year amid tight liquidity and over-exposure to real estate, a new report on Monday said.

Despite government support, the outlook for the banking sector in the world’s richest country is gloomy due to past "excessive lending" and "poor risk management", property consultant Landmark Advisory, the research arm of Dubai-based broker Landmark Properties, said in its latest Qatar real estate report.

Last month the government offered to buy around $4.1bn of real estate investments from Qatar’s banks as it moves to limit the fallout of the financial sector from the global crisis.

The Qatar Investment Authority (QIA), the sovereign wealth fund, is expected to buy further stakes in the financial sector later this year, after taking five percent holdings in all local banks in 2008.

The report was also bearish on the prospects for the Qatari property market, citing falling prices, weak demand and lack of mortgage availability.

Qatar’s population is growing due to a rising expatriate population employed mainly as labourers in construction and real estate but this would not translate into demand for housing as most workers are employed in special compounds, the report added.

The research said it was not Qatar’s booming petroleum industry that had fuelled rising population among expatriate professionals, rather it was real estate, which employs 45 percent of foreigners in the country and contributes only five percent to GDP.

By contrast five percent of all expatriates work in the petroleum industry, which accounts for around 70 percent of GDP, Landmark said.

Between the final quarter last year and end of the first quarter this year average freehold property prices fell 25 percent to 30 percent in Qatar- driven mainly by sharp value declines on the billion dollar island mega-project The Pearl.

Qatar’s banking sector has assets worth $110bn - the fourth largest in the GCC - according to research by Shuaa Capital, the Dubai-based investment bank.

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