With economic growth estimated to have reached 3 per cent in 2017, following expansion of 3.2 per cent in 2016, Bahrain’s growth is the strongest amongst the GCC states.

The kingdom’s retail and hospitality sectors remain key drivers, with the government actively driving initiatives to bring in more investors and diversify the country’s real estate market, said a report by leading property expert Cluttons.

The retail market continues to be one of the kingdom’s most stable sectors, as evidenced by the recent fourth edition of the “Shop Bahrain” festival held by the Bahrain Tourism and Exhibitions Authority (BTEA), stated Cluttons in its Bahrain Spring 2018 Property Market Outlook.

The event registered a record number of transactions totalling BD19 million ($50 million) from 145,000 transactions, compared to BD8 million ($21 million) from 130,000 transactions last year.

This has been matched by a number of new retail schemes announced in recent months, it stated.

Seef Properties, for instance, is developing ‘Liwan', a mixed-use development project located in Hamala, Bahrain City Centre is actively studying plans to expand, and the second phase of The Avenues is currently being planned.

The Cluttons report also highlights that Bahrain’s hotel industry continues to showcase strong performance, and is expected to witness further growth, with new hotel openings in the pipeline.

While average daily room rates slipped by 8.4 per cent to BD64 between January 2017 and January 2018, overall hotel occupancies across Manama increased from 42.8 per cent to 56.7 per cent over the same period, it added.

However, Cluttons’ report pointed out that with Saudi Arabia on track with its National Transformation Program 2020, and promoting itself as a tourist destination, Bahrain is likely to be impacted, and may see a curtailing of volume of Saudi tourists that typically frequent the Kingdom.

At present, around 57 per cent of all visitors to Bahrain are from Saudi Arabia, it stated.

Commenting on this expected trend, Faisal Durrani, the head of research at Cluttons, said: "Bahrain’s hospitality sector may experience some downward pressure as Saudi reforms designed to encourage tourism within the country filter through, but for now, the kingdom’s unique offering remains intact and continues to draw in tourists from across the border."

"We see this as an opportunity for further investments by the government in diversifying Bahrain’s leisure offering,and targeting new source markets for tourists," he noted.

Cluttons’ report shows that rents across Bahrain’s main residential areas slipped by 2.9 per cent in the first three months of the year, ending the stability that appeared to be building in the second half of last year, when average rents remained unchanged.

However, this has improved the annual rate of change to -12.8 per cent, from a fall of -17.3 per cent during 2017, and marks the first improvement in the annual rate of change in over a year, stated the property expert.

In the sales market, average residential capital values declined by 11.5 per cent in 2017, leaving them at an average of BD 839 per sqm . The first quarter has seen stability returning to the market, with no change being recorded across the board, said the report.

Saar and Al Janabiyah, in particular, appear to have seen a resurgence in interest from buyers, driven by the development of new malls and schools and also the emergence of new villa communities, it added.

According to the report the recently established Bahrain Real Estate Regulatory Authority shows forward thinking by the government and will bolster institutional investor confidence in the market, as it will enable more transparency. The move will further enhance the kingdom’s attractiveness as a property investment destination.

Harry Goodsoon, the head of Bahrain at Cluttons, said: "Whilst we wait for the regulations to catch up and improve the transparency in the market and as the economic windfall from the mammoth oil discovery is still a few years out, the residential market is expected to remain flat at best in the short term."

"The corrections, although still ongoing, appear to be losing their severity with each passing quarter, in part probably aided by the magnitude of corrections that have already taken place in both the sales and rental markets over the last four years," he added.

Cluttons pointed out that overall, Bahrain’s residential market was expected to remain flat for another 12 months at least.

Demand still appears to lag supply and so minor corrections in rents and values are likely to persist, although high demand areas, like Amwaj Islands, are likely to demonstrate greater resilience, it stated.

On the office market, Cluttons said Bahrain’s headline rents have largely remained stable. However, as has been the case for over three years now, deals are being concluded below advertised rates, it stated.

With some office rents now within touching distance of those for prime warehouse space in Bahrain, Cluttons doesn’t envisage any further severe corrections.

Overall, Cluttons’ outlook continues to be that with rents likely to remain stable through the course of 2018, any declines are likely to be contained between 250 fils and 500 fils, it added.-TradeArabia News Service