As Qatar booms, rents hit the roof
USA, 6 Sep 2007
DOHA, Qatar: Rising rents are causing widespread headaches in Qatar - and not only for tenants.
The rocketing costs are showing up in the country's worrisome inflation figures, and some believe they may be deterring companies and individuals from considering the emirate as a desirable Gulf location.
"It's a worrying sign when even real estate brokers themselves are questioning if they can afford to carry on here," said Sarosh Faisal of the Doha-based XPO Real Estate, who has seen his own family's rent shoot up. "Seriously though, many people are already at the upper limit of what they can afford, yet rents are still rising."
Official figures bear him out. The Qatar National Bank reported rental inflation of 26.25 percent in 2005, 25.97 percent in 2006 and 26.7 percent in the first half of 2007. General inflation has pushed up, too, prompting a warning at the start of the summer from Moody's, the global ratings agency, that price increases could threaten Qatar's competitiveness.
"Qatar now has one of the highest rental rates anywhere in the Gulf," said Reg Barichievy, general manager of the Colliers International agency here. "It is definitely becoming a factor when you're trying to recruit someone, too."
Salaries, meanwhile, are generally not keeping pace with the increases. A survey by GulfTalent found that, at the beginning of the year, Qatari residents were spending around a third of their income on rent; for neighboring Saudis, the figure was 19 percent.
Barichievy said: "An average 2-bed apartment, excluding utilities, now goes for around 8,500 rials a month when a year ago it went for 6,500." In dollars, the cost now is $2,367 compared with $1,787 last year.
"For a villa in a compound, which is the type expats have traditionally gone for, a year ago a 4-bed would have been around 18,000 rials, and this year it's about 20,000."
The main reason for the surge in prices is a major bottleneck when it comes to matching supply with demand.
"Qatar is going through a tremendous economic boom right now," Barichievy said. "As a result, you've got around 100,000 people a year moving here for work and they all have to be accommodated. While there are now dozens and dozens of towers and compounds going up, it will be some time before these come on line."
In the meantime, new residents are left chasing an increasingly scarce - and expensive - resource.
"There was some expectation that the Asian Games might change things," Faisal said. At the end of 2006, Doha played host to the Asian Olympics, and residential units that had been built for the event were expected to be made available to the public afterward, easing demand.
"In fact though, rents continued upwards," he recalled. "I think a lot of people charged very high weekly or monthly rentals during the games and, when they were over, thought, 'Wait a minute, if I can get that much, what is this property really worth?' "
Most real estate analysts predict little change in the next year or so.
"We think that for one to two years, it will stay high," Barichiezy said about rents.
But others disagree. "The balance is starting to be addressed," said Mark Proudly of the Doha-based international property advisers DTZ Qatar. "There will be a time lag, but I expect by some point next year we'll see stabilization in rents start."
For foreigners seeking to enter the rental market, there are some important limitations. "There are only a few property developments that are open to non-Qataris," Proudly said. "The Pearl Qatar is one major project and, there, foreigners can buy freehold. At the West Bay Lagoon, they can buy a long lease, although no register for this has been set up yet so it's sort of uncharted water."
Prices at one city-center project open to foreigners, the Zig Zag Towers, is 10,000 to 12,000 rials per square meter for most apartments, although waterfront townhouses are 17,500 to 20,000 rials per square meter. The first properties are scheduled to be completed next spring.
Yet, "with starting prices at around 1.3 million rials for a 2-bed, I'd advocate caution on this," Barichiezy said.
"There is a case to be made for buying these because of the high rents at the moment, but whether you'd get your money back in a few years' time, when a lot of projects will be on stream, is yet to be seen."