Rental rates on both commercial and residential properties in Bahrain have fallen significantly over the past two years because of oversupply.

That is the conclusion of CB Richard Ellis' latest MarketView, a Gulf Daily News report said.

"Faced by significant oversupply, the result of somewhat irrational exuberance in 2007 and 2008 which led to significant numbers of building starts, subsequently unmatched by demand growth, the office market is likely to have high levels of vacancy at least in the short and medium term," the report says.

"As a consequence, rental rates have fallen by around 30 per cent since 2008, with the result that Bahrain has become an extremely competitive location from which to do business.

"Despite the unrest in the kingdom, the banking sector remains the best regulated in the GCC and is still home to more than 400 financial institutions.

"Operating as a banking sector is not just about shiny new office space, the key remains the regulatory environment, an issue which Dubai and Doha in particular, have never fully embraced.

"However, the key advantages that Bahrain has always treasured have been the well regulated financial environment and political stability," the report adds.

The report says that in the residential sector there was strong upward pressure on occupancy and rates that took place up to the end of 2008, but rental rates declined across all categories of accommodation in the following two years.

"Rental rates in compounds and private villas appear to have stabilised but the sheer volume of new privately held apartment units that have entered the market in the last two years continues to exert downward pressure on rental rates in this particular sector especially in central Manama and Juffair," the report says. -TradeArabia News Service