(MENAFN- The Peninsula) joel johnson |
The Peninsula
According to the latest data by Global Property Guide, Qatar recorded the highest average monthly rent for two-bedroom apartments in the Middle East. The Peninsula explores why the prices remain elevated and keep rising gradually and when they are expected to decline.
Rents for apartments and villas in residential areas in Qatar's major cities including Doha, Lusail, and Al Wakrah skyrocketed during the World Cup and were expected to decline post-tournament. However, that is not how things turned up. The Peninsula explores why the prices remain elevated and keep rising gradually and when they are expected to decline.
According to the latest data by Global Property Guide, Qatar recorded the highest average monthly rent for two-bedroom apartments in the Middle East. The report showed that Qatar topped the list with an average rent of $3,742 (QR13,625) on a monthly basis followed by the United Arab Emirates with $2,208 (QR8,043), an immense difference of $1,534 (QR5,582) between the top two countries. Several factors affected the housing market as the transaction volumes increased rapidly by 36 percent in the previous years. During the third quarter of 2021, Muaither, Al Wakrah, and Al Khor recorded the highest volume of transactions in the market.
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Complaints
In the meantime, residents in Qatar were outraged and took to social media platforms to enquire and talk about the unchanged rents. The Peninsula spoke to a number of individuals in Qatar to uncover the arduous circumstances they are going through.
“My rent expired in December, but when I went to renew it, I was told the rent had been increased by the owner. But I am not sure whether the owner really knows this, as brokers are operating the residential building. I didn't get prior information before the rent was increased which put me in a tight situation because I obviously had to sign the contract or leave the flat,” a resident in Doha said, adding that the landlords are carrying out“unfair decisions” by not reducing the rents now that the global sporting tournament is over.
With the rent hike all over Qatar, residents are finding themselves in a difficult situation. Hanane El Yousefi, an expatriate, said that“it's very annoying and I'm really suffering to find an apartment in a good price.”
Another resident who came to Qatar last year said:“When I arrived in Doha, it was just before the World Cup and I thought myself lucky to find what I thought was an affordable house. A few months in and I notice that it is overpriced.'
The fixed rates since the World Cup period have affected a majority of the residents in the country resulting in a tough position and forcing them to leave their current apartments before their contract gets over. Pheobe, a resident who lives in Bin Mahmoud, told The Peninsula,“When I checked online to find another place to stay, I noticed that the rent hasn't come down despite the World Cup concluded in late December.
“It just makes me wonder with a vast supply of apartments now available, why the prices are still the same. It's quite absurd when you think about the demand and supply now compared to last year.”
Salient upshot
Even though some of the real estate officials believe that the prices will dip mid-year, while reaching out to several landlords during its investigation, The Peninsula found that the primary reasons for rent-hike include real estate investments and to benefit from the events in 2023 as Qatar expects a lot of visitors and tourists during the period. For years people have complained about extremely high residential rents in many parts of Doha, said Mustafa and Mittan.
Some residents believe that the widespread phenomenon of partitioning villa buildings and subletting them to several families is helping them to find accommodation at affordable prices, but this in fact jeopardises the residents by excessive consumption of power and water in one building. In addition to the pressure, they take advantage of facilities such as parking areas, roads, and sewage services. This has prompted the Ministry of Municipality to ban villa partitioning and fine people involved in such practices.
Companies and individuals engaged in the residential rental business have largely been operating without any oversight and regulations, with many demanding the tenants to pay a security deposit and one-month rent commission, as well as 12 post-dated cheques as a form of guarantee. This is not fair, said Mustafa.
Interestingly, people who are controlling the residential rental business are not licensed the same as the sub-tenants. All of this calls for increased government oversight and regulations for the sector, with an effective complaint redressal mechanism.
Experts' view
The Peninsula further looked into the plight of rental costs affecting many families in the country. Experts in the real estate industry anticipated a fluctuation in prices but believed that the rates will remain stable due to the evolving market with global events held in Qatar.
Speaking to The Peninsula, Jassim Al Emadi, Vice-Chairman of Al Emadi Enterprises, said:“I believe prices will be steady in 2023 which is healthy for the market, the prices were expected to not drop after the World Cup vs pre–World Cup prices as this is the healthy result. Moreover, the government has smartly commissioned projects such as the temporary fan villages in order to not overload the market with units which also helps in the stability of the market post-World Cup.”
Adding to the perspective that the prices will be balanced this year, Mohamed Ghofrane, CEO of Retaj Real Estate, said,“People will expect a big drop straight away after the event, the FIFA World Cup 2022, which is not correct.”
He outlined that since the market was associated with World Cup and other prominent events in 2022, the rental cost was expected to soar with the high demand for developments implemented in the country that could potentially stay for a longer period of time. Ghofrane continued by saying,“We have key areas where the prices never go down less than a fixed amount of rate. That's the market price because it is owned by many individuals and semi-government companies in places like West Bay and Lusail.”
In recent years, albeit the prices witnessed some decline in the housing sector, many areas still maintain solid rates resulting in the partitioning of villas and apartments by the residents. Sales and leasing officials believe that prices will subsequently fall towards the end of the second quarter.“If you look at the prices for the last 5-6 years, the only time prices dropped was during COVID-19. In the first quarter of 2023 we will see some stability and some fluctuation in the prices maybe within the mid of the year, but it won't exceed more than a 5 percent decrease in the market and these are applicable for particular areas like the south side including Al Wakrah, Al Wukair, and northern areas like Umm Salal. But within Doha, there will always be a high demand,” he added.
Although the prices have not changed since last year, numerous real estate officials were assertive on the decline of rental costs in 2023. During the tournament period, they assured The Peninsula that the prices will slow down after the mega event, which seems to be an antithetical situation at present. The market experts also highlighted that soaring demands and enhancing projects in Qatar is a significant criteria for the rise in rents while contributing to sustainable development and growth of the economy. Last year, the Ministry of Justice reported that the market made close to 50 commercial transactions until September 2022 with a value of QR15.2bn with the majority of residential property and the highest demand, especially for rental properties in Qatar.
“We have noticed a drop of 20 to 30 percent in Lusail whereas prices in The Pearl, although declining, have not experienced a similar sharp drop. However, with central banks around the world raising interest rates to fight inflation, we expect further drop in prices this year as it becomes more expensive to finance mortgages for home buyers,” an official from BLK Oryx Real Estate said, adding that if the residential demand is weaker than the current supply, the landlords will be left with no option but to reduce the rental prices in line with market expectations.
The experts kept elucidating that the apartment and villa owners aimed at benefitting themselves, which consequently affected several occupants. Veruschkha Van Dijk, General Manager at the Mirage International Property Consultants, said,“Rental pricing akin to many commodities is fundamentally dictated by supply and demand characteristics and whilst many in the industry expected prices to drop to the sudden availability of rental units due to the conclusion of the FIFA World Cup event, prices have remained fairly steady.”
Veruschkha further added,“The combination of these and other factors seem to provide a level of financial nourishment in boosting Qatar's economy. So, pricing within the residential leasing market will not really see the declines that were expected post-FIFA and this can only be welcome news for landlords in consolidating their financial aspirations.”
With ample job opportunities and a high standard of living, many individuals choose to traverse, reside and work in Qatar in addition to the rising projects, especially in the oil and gas industry, this year's soon-to-take-place expo event and refurbishment of old Doha.
Speaking to The Peninsula, Steed Taylor, Business Development Director at FG Realty, said:“The oil and gas sector, a cornerstone of Qatar's economy, continues to thrive, with numerous new projects underway. This has created a plethora of job opportunities, further boosting the demand for rentals. As the industry continues to grow, it is expected that the demand for rentals will remain consistent.”
This year's events and exhibitions in Qatar are also reported to play a major role in the rising rents of several residential areas as many landlords continue to take advantage. Taylor said,“The upcoming Qatar Expo, which is set to take place this year also had a positive impact on the rental market. With an expected influx of visitors, there has been a demand for short-term rentals in hotels and hotel apartments.”
“As the city's oldest neighbourhoods undergo a transformation, residents are moving into the surrounding areas, driving up demand for rentals. The improvements to the city's infrastructure and the creation of new public spaces are attracting both locals and expatriates, further fuelling the demand for rentals,” he added.