The report released on Sunday, Knight and Frank admitted that the real estate industry globally had been hard hit during this prolonged economic downturn and Bahrain’s market has also struggled with its residential and commercial sectors having suffered continued year-on year negative growth in both rental and sales values since their peak in 2008.
“Instilling confidence back into the real estate market will be the key to any future success for the country if local, regional and international investors are to be attracted back to Bahrain’s shores. There is no doubt that this can be achieved, but it will require cohesive public and private initiatives creating transparency in the market, introducing international “Best Practice” regulation and increasing the availability of affordable finance,” it added.
According to report findings office rents have continued to fall in Bahrain for the third consecutive year following the peak of the market in 2008.
“Prime rates are down by a further 11% in the first half of 2011 reaching a monthly rent of BD9 per square metre which is back to where the market was over five years ago in the 2005 to 2006 years. On a positive note, the rate at which rents have declined has slowed from a previous year-on-year dramatic fall of 30% for the period 2009 to 2010,” it said.
“With a continued increase in supply together with sluggish demand, vacancy rates are continuing to rise, reaching 26% for all occupiable Grade A and B space available in the market. The growth rate of supply has however started to slow, as the last of the grand office projects conceived during the boom times are coming to construction completion and only a limited number of new schemes have broken ground since the economic downturn,” the report indicated.
“The strata title office market continues to attract limited interest in Bahrain with very little marketing collateral available for properties. Developers continue to offer unsold units on the rental market in order to maximise the value of their asset whilst holding out for a single investor,” it said.
“The average rental rate is now BD1, 200 per month (US$3,183) which is a drop of -25%, down from BD1, 600 per month (US$4,243) in the second half of 2010. Rental price changes in the apartment market have been less dramatic than villas over the last six months but non-freehold units have seen the rate of price depreciation slow to -6% between H2 2010 and H1 2011 compared to 12% for the previous six months,” it added.
“As with freehold villas it is encouraging to also see rental prices of freehold apartments showing gains during this period of continued economic and political uncertainty with a 5% growth being registered.
“The largest shifts in rent since the start of the year have been seen in the three bedroom apartment market with freehold units increasing by 20% while non-freehold stock has seen prices fall by 17%.
“The trends show that a rental premium is also being paid for apartments located on the larger developments, although at a margin of 14%, it is smaller than that recorded for villas due to that fact that there is still a large over supply of stock in the market.
“The downward trend in sales prices for both villas and apartments, experienced since the middle of 2008 in Bahrain, has continued over the last six months although the rate of decline has begun to slow, at least in the short term.”
Overall, the report added, average asking prices for property fell by 6% from January 2011 to June 2011 compared 13% for the previous six months.
“Villa prices declined the most over apartments with both three and four bedroom detached homes seeing half yearly falls of 11% as owners have tried to tempt prospective investors into a purchase in what remains a challenging market. The average prime apartment now has a quoted sales rate of BD790 per square metre (US$2,095) while villa rates have fallen to BD625 per square metre (US$1,658) in the first half of 2011,” the report said.
“A number of developers who have been struggling to sell their now completed properties have eventually been forced to make the difficult business decision to offer unsold villas and apartments on the rental market in an attempt to generate some income from their multi-million dollar investments.”