Transaction volumes rose strongly by 36%
Lalaine C. Delmendo | January 24, 2022
With the recent introduction of more liberal foreign property ownership rules, the end of the economic and political blockade against Qatar, as well as improving economic conditions, it is not surprising that Qatar's housing market is now showing signs of improvement.The real estate price index rose by 2.82% during the year to Q3 2021, in sharp contrast to a y-o-y fall of 5.67% in Q3 2020, according to the Qatar Central Bank (QCB) - the country's best showing since Q2 2016. However in real terms, real estate prices were up by a minuscule 0.11%.
Quarter-on-quarter, prices increased 2.06% in Q3 2021 (0.82% inflation-adjusted).
Transaction volumes in the country rose strongly by 36% to QAR 31 billion (US$8.5 billion) during 2020, from QAR22.8 billion (US$6.3 billion) in 2019 despite the pandemic, according to the Ministry of Justice. In Q3 2021, transaction volumes for houses in Qatar fell by 25% from a year earlier but increased by 60% from two years ago, according to ValuStrat's Q3 2021 report.
Muaither, Al Wakrah and Al Khor had the highest volume of transactions for residential houses in Q3 2021.
The improved real estate market performance “is evidence of improved buyer confidence stemming from several factors: increasing competitiveness of properties, the introduction of policies facilitating foreign investment, normalisation of relations with GCC countries, and positive reinforcements from holding of World Cup in 2022,” according to Pawel Banach, ValuStrat's General Manager.
In preparation for the 2022 FIFA World Cup, Qatari real estate boomed for three glorious years 2012-15, fuelled by rapid population growth and a construction boom:
- In 2013, the real estate price index surged 20.74% (16.45% inflation-adjusted).
- In 2014, the real estate price index soared by 34.67% (31.81% inflation-adjusted).
- In 2015, real estate prices rose by 14.39% (10.75% inflation-adjusted).
However in 2016, the value of real estate transactions plunged by about 50%, and prices fell by 4% (-5.15% inflation-adjusted). Real estate prices fell a further 9.9% (-10.4% inflation-adjusted) in 2017, by 2.6% (-2.4% inflation-adjusted) in 2018 and by another 8.1% (0.6% inflation-adjusted) in 2019, as Saudi Arabia's hostility adversely affected Qatar's economy. In 2020, the housing market continued to struggle, with prices falling further by 8% (-4.8% inflation-adjusted), amidst the Covid-19 pandemic.
In October 2020, the Qatari government responded by loosening its foreign property ownership rules, in an effort to attract more expatriates, foreign buyers, as well as real estate funds.
Then in January 2021, the Saudis agreed to end their sweeping economic and political blockade against Qatar, begun four years ago. Qatar's politics are more liberal, which irritates the Saudis. In addition Qatar, like Turkey, maintains support for the pan-Islamist Muslim Brotherhood, abhorred by the UAE and the Saudis, and maintains links to Iran, with which it shares a major oil field. The new deal, which may reflect Saudi attempts to conciliate Biden after its previous love-fest with Trump, restores the air, land and sea links to the emirate that were severed in June 2017.
The Qatari economy is projected to grow by 1.9% this year, following a contraction of 3.6% in 2020, according to the International Monetary Fund (IMF).
Analysis
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Yields in Qatar are excellent at around 12%
Qatar rentals have tripled in the past six years. Yields are now excellent. “A landlord who has just bought a new five bedroom house for QAR1.8 million (US$494,105), a good quality house, is renting it out at QAR18,000 (US$4,941) per month,” says Parry. This rental translates into a annual gross yield of 12%.
Rentals of QAR25,000 - QAR40,000 (US$6,863- US$10,980) are more usual houses in West Bay, an upscale residential district. Then there is West Bay Lagoon, which is even more expensive.
“There is a very limited supply of condominiums at the moment, only 2-3 buildings,” says Parry. “All that will change when the Peal of the Gulf comes on stream in the Q1 of 2008.”
Income tax ranges from moderate to high in Qatar
Rental Income: Rental income is considered a business income and taxed at a flat rate of 10%.
Capital Gains: Capital gains derived from business activities are taxed at a flat rate of 10%. Otherwise, capital gains are not taxable.
Inheritance: There is no inheritance tax in Qatar.
Residents: Resident individuals are not subject to tax on their income and capital gains, provided that these are not derived from business activities. Business income and capital gains are taxed at a flat rate of 10%.
Transaction costs are very low in Qatar
Transfer fee is levied at 0.25% of the property value. Other costs when buying property are very minimal, such as authentication fees of documents. It takes around 13 days to complete the process of registering a property.
The laws are mildly pro-tenant
b>Rent: Under Law No. 4 of 2006 in effect from February 2006 to February 2008, annual rent increase is limited to 10%. The implementation of the rent cap is widely expected to be extended.
Tenant Security: There are in theory only three reasons the landlord can give to force his tenant to leave: non-payment of rent, moving in of close family, and to demolish the property. However, there are reports that this law is often not observed, and that landlords are using fictitious demolition plans to squeeze their tenants out.
Qatari economy improving gradually
Before the pandemic, Qatar’s economy had been growing by an annual average of 16.5% in 2004-11 and by 3.8% in 2012-16.The economic blockade severely hit Qatar’s economy. The participating Gulf-based Arab nations cited Qatar’s support for Islamist groups, violating a 2014 agreement with the members of the Gulf Cooperation Council (GCC), as one of the main reasons for the blockade. Qatar was also criticized by its neighbours for its amicable relations with Iran.
The four Arab nations issued a list of 13 demands on June 22, 2017, which included curbing diplomatic ties with Iran and shutting down Al-Jazeera. Qatar refused to comply, stating that it would not agree to measures that threaten its sovereignty. In a surprise move in December 2018, Qatar ended its nearly 60-year membership of the Organisation of the Petroleum Exporting Countries (OPEC) – the oil cartel dominated by Saudi Arabia.
In January 2021, the Saudis agreed to end their sweeping economic and political blockade against Qatar. The new deal restores the air, land and sea links to the emirate.
Despite the blockade from 2017 to 2019, Qatar had one of the highest current account balances in the region ranging from 3.8% to 8.7%. But due to the pandemic, in 2020 Qatar had a current account deficit, equivalent to 2.5% of GDP. Then the situation changed again, and Qatar’s foreign merchandise trade balance recorded a surplus of QAR 57.8 billion (US$ 15.9 billion) in Q3 2021 - almost three times as much as the QAR 19.6 billion (US$ 5.4 billion) surplus in Q3 2020, according to Planning and Statistics Authority (PSA).
As a percent of GDP, Qatar’s government gross debt increased sharply to 71.8% in 2020, from 62.3% in 2019 and 52.2% in 2018, according to figures from the IMF. But debt is expected to fall again to about 60% of GDP in 2021.
In November 2021, inflation increased to 6.09%, sharply up from the previous month’s 4.2% and the highest level since December 2008, mainly driven by a surge in transport costs.