Despite slowing economic conditions, which continue to hamper the property market in Bahrain, there has been a marked stabilisation across most real estate sectors in the second half that is expected to carry into 2017, according to international real estate consultancy, Cluttons.

The resilience of rental budgets in the residential market which, in the face of economic fallout and rising inflation, continue to outperform expectations, stated Cluttons in its Bahrain 2016/2017 Winter Property Market Outlook report.

On the residential market, Cluttons’ research shows that with the exception of Amwaj Islands, where there was a marginal BD50 ($128) per month rise in rents for four-bedroom villas, no other submarket in the kingdom registered any change in rents during the third quarter.

The only exception was a BD 0.50 per sq m rise in Financial Harbour (BD 8 per sq m) and Amwaj Islands (BD5.50 per sq m) for fitted office space.

The stability borders on stagnation with Cluttons finding largely no change in rents. The same can be said for a remarkably sluggish retail real estate market, with rents in this sector expected to hold steady for another six to twelve months.

Harry Goodson-Wickes, the head of Cluttons Bahrain, said: "The stabilisation in rents across the sector is reflective of weaker underlying fundamentals in the market. Economic fragility and the ongoing impact of the low oil price environment have curtailed job creation levels and dampened overall sentiment and this will continue to hamper the kingdom’s property market during the fourth quarter, continuing into H1 2017."

"The few exceptions where we have seen growth include developments such as Amwaj Islands for the residential market, the Financial Harbour for the office market and Isa Town for the retail market," he stated.

Similar to the residential market, office rents across the kingdom’s key submarkets remained largely unchanged during the first nine months of the year.

"Our experience shows that quality and perceived value for money continue to drive interest in newly launched schemes, suggesting that tenants are very much in the driving seat and can cherry pick from a range of options on the market. At Segaya Views and Cebarco Tower for instance, we have recorded a steady level of enquiries for the 140 furnished one-, two- and three-bedroom apartments on offer, with rents starting from as little as BD650 per month," remarked Goodson-Wickes.
 
Faisal Durrani, the head of research, said: "Households in Bahrain have been faced with some very challenging headwinds over the past 12-18 months, with subsidy removals and job security fears denting confidence and driving down budgets, but we appear to be entering a period of stability with the market flattening out."

"We had previously expected to see rents decline by 5 per cent on average through the course of the year, but we have now revised up our forecasts for the residential rental market, with little to no declines now anticipated as we head toward the end of 2016," he added.

Goodson-Wickes said the limited activity in the office market continues to be largely driven by internal relocation activity, although renewed stability across the kingdom has also helped the market settle.
"Landlords however, remain reluctant to adjust rent downwards as they are already at levels not seen in over four years. We have already seen concessions made on lease terms and expect this trend to intensify. There has been a concerted move to offer greater flexibility around lease terms, whilst also offering smaller amounts of office space," he stated.

On the retail market, Cluttons said the third quarter marked the sixth consecutive quarter of sluggishness for retail rents.

Isa Town was the only exception, where rents nudged up by BD 0.50 psm to BD 7 psm over the summer before stabilising. Al Seef (BD 12.5 psm) and Amwaj Islands (BD12 psm) remain the Kingdom’s most expensive and highly sought after locations, which has helped to sustain rents.

"Overall, we are not forecasting any significant swing in office rents in the Kingdom, with any changes over the next six months likely to be confined to +/- BD 0.50 psm. This flat outlook assumes no major regional or global economic shocks, which Bahrain remains exposed to, given the office market’s heavy reliance on the hydrocarbon sector and supporting industries," remarked Durrani.

Pressure on household budgets has to a large extent helped to keep retail rents in check. These were at risk of overheating given the retail sector’s apparent resilience in the first few quarters following the oil price shock.

This was followed by a surge in new retail developments across the Kingdom, fuelling a string of new market entrants, which has now tailed off, said the Clutton in its report.

"We view the current stability as positive for the market’s ongoing development. We remain cautiously optimistic that rents will hold steady over the next six to twelve months," stated Goodson-Wickes.

"New supply, in the form of the rapidly completing BD45 million ($116 million) Avenues Mall development for instance, is capable of being absorbed into the market," he added.-TradeArabia News Service