Bahrain’s residential property sector continued to show signs of market stability during the third quarter of 2015 with insignificant quarter-on-quarter changes in key performance indicators, said a report.

Despite the increasing demand for housing in the north-western parts of the country (in areas such as Sar, Jasra and Budaiya), residential rentals across all areas remained stable with a marginal decrease of 0.1 per cent, according to leading consultancy PKF.

Reef Island, which remains one of Bahrain’s most prestigious and expensive residential areas, achieved an occupancy of 95 per cent across leased properties with average rental rates standing at approximately BD1,000 ($2,633) per month.

On the other hand, Amwaj Islands, which is positioned as one of the most affordable apartment markets in the country, reported average apartment rentals of BD700 ($1,843)/month, while villas in the same area were leased for BD1,350 ($3,555)/month.

With regards to new project announcements, the third quarter witnessed the launching of a new high-end residential development on Amwaj Islands, named Modern Residence-2, stated the PKF in its report.

Upon completion in the second quarter this year, the development will feature apartments and penthouses, ranging from 87 sq m to 198 sq m, with prices starting from BD75,879 ($199,792).

Due to the area’s close proximity to key economic zones, including Bahrain International Airport, and new emerging shopping districts, there is a sustained demand for residential units in Amwaj Islands, the report said.

In addition, the long-delayed BD245 million ($645 million) mixed-use ‘Villamar project’ in Bahrain Financial Harbour, comprising 800 residential units across three twisted towers resumed after the developer secured financing for its completion, it added.

According to PKF, the sustained low rates of oil prices are expected to have a negative impact on demand for residential properties in the kingdom as companies, particularly those in the hydrocarbon sector, conduct staff redundancies to compensate for lower oil revenues.

As per a third-party report, rental rates in the market are forecasted to decrease by three to four per cent over the next year due to lower demand indicators.

In addition, sales transactions in the property sector are also likely to be negatively affected as disposable incomes among key target buyers (especially the Saudi market) will be hit by the current oil market, it added.

On the office segment, PKF said the sector remained relatively stable during the third quarter of 2015 with no major deliveries of new commercial developments.

The quarter was characterised by an increasing demand for smaller units (100-200 sq m in size) with flexible lease terms, premium facilities and good connectivity.

Although current demand for office space is predominated by smaller units, minimal demand for larger units is still triggered by government institutions and renowned international firms.

Due to the improved social and political stability in Bahrain, resumed business activity from multinational firms has been noticed in the kingdom.

Approximately 25 per cent of all office space is occupied by multinational companies, while the hydrocarbon sector accounts for another quarter of the total office market, it added.

According to PKF, the average lease rates across Grade A office space in Bahrain remained relatively unchanged during the third quarter and ranged between BD7 to 9 ($18.4 to $24) sq m.

The new office properties slated for completion this year are likely to put downward pressure on rental rates and occupancy rates across older office developments, it stated.

One notable project, expected to be delivered in mid-2016, is the 50-storey mixed-use United Tower at Bahrain Bay, which will house the five-star Wyndham Grand Manama hotel along with modern corporate office space, it added.-TradeArabia News Service