By Staff writer
Cluttons says recent oil price slump has impacted level of office take up, job creation levels and residential demand
Renewed economic stability in Bahrain, which has boosted the kingdom's property market, has been tempered by the weakness of oil prices, Cluttons has said in a new report.
The real estate consultancy said the recent oil price slump has impacted the level of office take up, job creation levels and therefore residential demand.
Cluttons' Spring 2015 Bahrain Property Market Outlook report, indicated that rents and values across the kingdom's residential market are yet to see a notable impact, but low oil prices are expected to further undermine economic growth which slowed to 4 percent last year, from 4.9 percent in 2013.
Harry Goodson-Wickes, head of Cluttons Bahrain and Saudi Arabia, said: "In the current global climate, the serious challenge of oil prices remaining well below the government's forecast is seen to be taking centre stage. With that in mind, the residential market remains at high risk of losing its momentum of growth and we expect rents to remain stable, with declines likely as we approach the end of the year and demand starts to weaken."
Cluttons' report said that, unlike the residential lettings market, outlook for the sales market is stable as a result of the government's recent series of policy announcements designed to bolster residential investor sentiment over the short to medium term.
"Headlining these regulatory changes has been the announcement of the resumption of several landmark schemes that have remained dormant, tantalisingly close to completion since the onset of the financial crisis," said Goodson-Wickes.
"While it is unclear how the stalled residential projects have been selected, by tackling projects such as the iconic Villamar development in Bahrain Financial Harbour through the engagement of Gulf Finance House and Saudi based Al Rajhi Bank, we can see that there is strong underlying commitment by the authorities to those who are heavily invested in the residential market."
According to the report, the office market has remained mute, with the Diplomatic Area and Financial Harbour area registering rent declines of close to 6 percent in 2014, but with no further decrease recorded so far in 2015.
Faisal Durrani, international research and business development manager at Cluttons, said: "Our short term outlook is for office rents to continue at the current rate, with downward corrections likely to materialise later in the year and into 2016 if oil prices remain in the $50 to 60 per barrel bracket."
Cluttons said the retail market in Bahrain continues to remain resilient and is still expanding, with Saudi tourists in particular visiting Bahrain in large numbers each weekend to avail of the kingdom's growing retail offering.
"The silver lining in the otherwise economically debilitating tale of oil price weakness is a stronger US Dollar, to which the Bahraini Dinar maintains a fixed peg," said Durrani.
"A stronger dollar will translate into cheaper import costs, which will cascade down to consumers in the form of increased disposable income levels, which suggests a bright short-medium term outlook for the retail market as households are tempted into spending more. This will in turn drive both the take up and performance of the retail sector."