Improving economic conditions and political stability are continuing to underpin growth in Bahrain and fuel resilience in the residential and industrial property markets, said a report.

The government’s wide ranging infrastructure investments are leading to increased job creation, which is expected to underpin future economic growth, and has already led to a rise in confidence levels amongst builders, according to the latest research by international real estate consultancy Cluttons.

The Cluttons’ Winter 2013 Property Market Update report highlights areas such as Al Seef in particular that has seen work resume on a small, but growing number of previously stalled residential schemes.

Freehold projects such as The Breeze and The Breaker are projected to deliver 154 units to the market by the end of 2014, although Marina West on Bahrain’s north coast remains on hold, it stated.

The report findings point to positive movements in the government housing sector with schemes receiving a boost through the GCC Support Programme. Work is progressing at sites in Sitra, Samaheej, Galali and Northern Town that will deliver in excess of 1,500 units, but this still falls short of the 54,000 requests for government-built homes.

The BD750 million ($1.9 billion) Social Housing Finance Fund, set up through a joint venture between the Housing Ministry and a consortium of private banks to tackle the shortage (by offering alternative routes to home ownership through the option of buying off plan from approved private developers) is expected to inject fresh impetus into the private residential sector and aid the completion of some schemes, but the full impact is too early to be assessed, said the property expert.

In contrast to positive tones from the national housing sector, the lettings market remains mute, with rental values unchanged during the third quarter, following growth of 0.4 per cent in second quarter.

This leaves average monthly rents at BD863 in Bahrain's expatriate dominated submarkets, translating to a 2 per cent increase on this time last year. Juffair was the best performing market for apartments (4.9 per cent) and Saar, which recorded the strongest growth in villa rental rates (8.1 per cent).

Cluttons’ head of Bahrain, Harry Goodson Wickes, said: “Employment opportunities across the border in the neighbouring Saudi Arabia, at the vast oil and gas installations in Dahran, are providing a continuous second stream of residents that view Bahrain as a more favourable location to live.”

In contrast the Kingdom’s office market continues to remain very subdued, with rents still falling and activity mainly driven by office upgrades. Average rentals remain historically low with average rents for both fitted out and shell and core space unchanged during third quarter, said Cluttons in its report.

Existing occupiers continue to negotiate further downward adjustments and where landlords have been slow to respond, occupiers are relocating to other submarkets perceived as more affordable and offering greater value for money, such as the Diplomatic Area.

Landlords that have reacted quickly are even offering lease terms as low as two years, which gives occupiers flexibility, but also benefits landlords in the short term with steady income.

Elsewhere in the commercial landscape the report highlights the retail and hospitality sectors as entering a slow but positive recovery phase, underpinned by improving levels of investor confidence, with a ripple effect translating into enquiries for investment products.

According to Cluttons, the demand is occurring on well let, high yielding properties, predominantly in the Seef area.

Industrial

With the financial and banking services (FBS) sector still experiencing decline, Bahrain’s industrial sector continues to remain resilient with government projections indicating that the sector could soon surpass FBS as the most important component of Bahrain’s economy.

The Cluttons’ report highlights incentives such as tax breaks and 100 per cent freehold land ownership, coupled with large scale infrastructure projects in nearby Qatar and Saudi Arabia, as catalysing the growth of this sector across Bahrain.

“The Kingdom’s industrial parks are increasingly growing in popularity due to their ability to accommodate rapid expansion of the sector, but the dearth of large land plots has persisted throughout 2013. This has put further pressure on freehold values, which have risen from BD161 psm in the spring to BD183 psm in October, a rise of 13.6 per cent," stated Goodson Wickes.

"Rentals have also faced upward pressure in the face of the supply drought and we expect further creep in both rental values and the cost of freehold and leasehold plots, as the government looks set to continue encouraging expansion in this sector," he added.-TradeArabia News Service