Bahrain will remain a challenging market with limited demand for and significant over supply of prime homes and offices, according to Knight Frank Q2 2010 Bahrain property sector report released on Tuesday.
According to report apartments have experienced the largest drop in price with a negative 23% shift recorded for the average property. A typical two bedroom unit is now quoted at BD870 per square metre (US$2,308) and a significant over supply, large pipeline of stock and limited demand for this type of high end product is the cause. Villa prices have fallen on average by 13% and are now being quoted at a little over BD700 per square metre (US$1,857) for a typical three or four bedroom detached home in a master planned scheme
“Census results for 2010 have now been released showing that the Bahrain population has almost doubled since the year 2000 reaching 1.23 million people at the last count. Growth has however slowed significantly during the economic downturn to 4.4% year on year from a peak of 7.6% in 2007. Driven primarily by expatriate migration, this population boom has shifted the demographic balance of the country and we now see a majority non-Bahraini group for the first time with just over 666,000 residents. This majority is on track to grow over the coming years outstripping the Bahraini birthrate and property developers will need to be aware of the groups’ profile, enabling them to accurately meet what will predominantly be rental demand. Their focus will need to be on type of product and price point in an ever more challenging and competitive market,” it said.
“Rapid population growth primarily driven by expatriate migration has meant that Bahrain’s workforce has also increased considerably in recent years. There are now an estimated 474,000 employees in the country and the latest year on year growth rate of 4.2% is reduced from the peak of almost 17% in 2005.
“With the current oversupply of office space in Bahrain, we estimate that the lease up period for this stock would be a minimum of four years even if no other properties were completed during this time. However, in the Diplomatic Area alone there will be an additional 100,000 square metres of space completed within the next 18 months. In the space of four short years the supply versus demand dynamics for Bahrain have moved from significant shortage to large surplus as developers were caught out by the sudden change in economic fortunes. Up until 2002, the tallest building in Bahrain by some margin was 27-storeys and now there are almost ten properties that are 50-storeys and above.
“Bahrain remains a price sensitive market where affordable property, at the best possible price, is being sought after by national, regional and international businesses. Prime accommodation that was once being quoted for in the peak years of 2007 and 2008 at over BD13 per square metre per month is now being offered to prospective tenants at BD10 per square metre or less. This represents a negative shift of 35% within the space of two years taking rental rates back to the levels experienced in 2006 just prior to the escalated boom times. Year on year growth for office rents in 2010 was extremely poor with figures of minus 25% recorded which is symptomatic of sluggish demand and high levels of supply,” it added.