Bahrain rents fall; focus on quality developments
Manama, October 8, 2012
By Sree Bhat
Bahrain's residential market has seen a decline in rental values in many areas, while rates strengthened in some new quality developments, according to a real estate expert.
Bahrain's residential market can actually be split it into micro markets -- areas that are doing well and areas that are not doing so well, said Harry Goodson-Wickes, director, Cluttons, a real estate specialist.
Speaking to TradeArabia following the publication of Clutton's Q3 report on Bahrain's real estate, he said current tenant demand is focussing on modern developments providing additional facilities and amenities.
"Amwaj is going through a very good patch at the moment. Occupancy levels are very high and there is very little stock available. A lot of that demand has come from people moving out of the perceived less safe areas and also there a good lifestyle up there. That has been a real attraction," he said.
"As a result, Saar has struggled. Because of the safety issue people have decided to move out to other areas of the island and rents have fallen quite significantly."
Cluttons predicted continued on-going activity and interest in the residential market in Bahrain over the next six months. However, with increased supply hitting the market in the form of large residential developments, it is likely that rental values will continue to soften for the foreseeable future.
Perception of Bahrain as a ‘renters market’ is driving many tenants to bargain hard for lower rental rates, it said.
The sales market has seen an increase in properties for sale across the island as an increasing number of expatriate owners look to recoup some of their initial capital and GCC buyers take a longer term view of the market, said the report.
Goodson-Wickes said Juffair, where new developments such as Fontana Towers have come up, is seeing a renewed interest with enquiries for residential accommodation showing a marked increase over the past three months. But there has been quite an amount of supply entering the market there. "Of course the demand is still there, but that hasn’t quite kept pace with new supply," he says.
The strengthening of villa rental prices in areas such as Adliya and the Amwaj Islands is a sign that the market is nearing the bottom of the rental cycle, the Cluttons report said.
With the launch of many new projects in Saudi Arabia's Eastern Province, Bahrain has seen an influx of expats working in those companies but choosing to live in the kingdom. Several self-contained developments near the King Fahad Causeway are seeing good demand from this segment, said Goodson-Wickes.
New projects are being developed to meet this demand with asking rates higher than elsewhere, ranging from BD1,400 to BD2,000 per month which is significantly above the market norm.
"This is a new demand coming in that specific area because of the projects coming in the Eastern Province."
Goodson-Wickes said areas such as Saar will come back because there are good schools, supermarkets, etc. in the area. "But landlords really have to up the level of amenities that they are offering. The communal areas are going to be more important than ever in terms of keeping tenants there. Good gyms, gardens, tennis courts, squash courts, clean swimming pools and play areas for children are going to be very important. They can make a big difference in the rents that the landlords can charge."
In the office sector, he saw an increase in demand in the Seef area with companies choosing to relocate to the new buildings in the area. "Seef is becoming a credible alternative to Diplomatic area. Companies are committing a lot of resources in moving to new offices in Seef," said Goodson-Wickes.
He agreed that new investments are not coming into the high-end real estate sector and there were very few new companies setting up large offices.
However, he said Bahrain is moving towards normality. "If you visit the malls in the weekends, you can see the buzz coming back. I hope the government initiatives that focus on building infrastructure, affordable housing, oil and gas exploration will be drivers for retail, residential and commercial office space," said Goodson-Wickes.
He doesn't see immediate revival of the many stalled projects. "A few construction companies are rumoured to join together to complete some of the unfinished projects and come to an agreement on sharing of the proceeds. It’s going to be that sort of deals that will bring these projects to fruition. But the problem is a lot of these projects are not supported by demand. That’s why they are stuck at the moment."
Meanwhile, wealthy families and investment firms here are looking at diversifying their portfolio into London and Dubai markets, Goodson-Wickes said. Cluttons has successfully arranged significant such deals in recent days, he added. - TradeArabia News Service