Qatar’s housing market is gradually improving
Lalaine C. Delmendo | October 29, 2020
Qatar’s housing market remains weak, as it continues to be adversely affected by the economic and financial fallout from the ongoing blockade, as well as the COVID-19 pandemic. Worse, supply continues to rise despite plunging demand, resulting to falling residential property prices.
The nationwide real estate price index plunged 9.77% during the year to Q2 2020, in contrast to a y-o-y rise of 1.42% in Q2 2019, according to the Qatar Central Bank (QCB). However in real terms, real estate prices increased 1.97%, as the country continues to suffer from negative inflation.
Quarter-on-quarter, prices were down 1.92% in Q2 2020 (-0.31% inflation-adjusted).
Based on the ValuStrat Price Index, the average residential property price in Qatar was QAR 7,731 (US$) per square meter (sq. m) in Q2 2020, down 1.4% q-o-q and by 4.1% y-o-y. By property type:
- Apartments: the average price was QAR 11,152 (US$3,063) per sq. m in Q2 2020, down by 2.3% from the previous quarter and by 6% from a year ago
- Villas: the average price stood at QAR 6,052 (US$1,662) per sq. m, down 1.2% q-o-q and 3.6% y-o-y.
“Amongst freehold apartments, Lusail witnessed the highest fall in capital values followed by West Bay Lagoon and The Pearl,” said ValuStrat.
Qatari real estate had previously boomed for three glorious years, fuelled by rapid population growth and a construction boom in preparation for the 2022 FIFA World Cup:
- In 2013, the real estate price index surged 20.74% (16.45% inflation-adjusted).
- In 2014, the real estate price index soared by 34.67% (31.81% inflation-adjusted).
- In 2015, real estate prices rose by 14.39% (10.75% inflation-adjusted).
However in 2016, the housing market slowed sharply, with the value of real estate transactions plunging by about 50%, and prices falling by 4% (-5.15% inflation-adjusted). Real estate prices fell a further 9.9% (-10.4% inflation-adjusted) in 2017, by 2.6% (-2.4% inflation-adjusted) in 2018 and by another 8.1% (0.6% inflation-adjusted) in 2019, as Saudi Arabia’s hostility adversely affected Qatar’s economy.
Qatar’s housing market is expected to continue to struggle during the remainder of the year, as the COVID-19 pandemic is aggravating the crisis in the region. The Qatari economy is projected to decline by 4.5% this year, following a miniscule growth of 0.8% in 2019, according to the International Monetary Fund (IMF).
Foreign property ownership eased further
In October 2020, the Qatari government loosens its foreign property ownership rules further, in an effort to attract more expatriates, foreign buyers, as well as real estate funds.
The new law will include two important changes:
- Increase the number of locations where non-Qataris can purchase real estate outright
- Introduce a two-tiered residency program that rewards large investors with government-provided services
Foreign investors who buy a property valued above US$ 1 million will be eligible for permanent residency, which comes with government benefits such as education and health care (previously limited to Qatari citizens and long-time permanent residents). With the new law, a semi-permanent residency status is now open to buyers of property worth US$200,000, who can obtain renewable residency permits for themselves and their families without the need to be sponsored by an employer.
In addition, the Ministry of Justice has recently launched a special section on its website for non-Qatari real estate ownership. The page lists the areas in which non-Qataris may own and benefit from real estate, the procedures, terms and conditions for real estate ownership and use. The page also answers the most common questions about real estate ownership in the country.
This follows earlier efforts by the government to boost foreign demand. In March 2019 Law No. 16 of 2018 became effective, increasing the number of freehold zones in Qatar from 3, to 10. Foreigners who buy in these designated freehold zones are automatically granted permanent residency, which extends to the owner’s family, for the whole duration of the ownership. Those qualified include:
- children of Qatari mothers who are married to foreigners;
- people with special talents "needed by the state";
- other individuals who extended notable services to the country.
However, citizenship will still be off-limits to foreigners.
Permanent residents of Qatar will be treated like Qatari nationals and enjoy benefits such as access to healthcare and education systems, priority (after locals) for military and civilian public jobs, and will have permission to operate commercial activities without a local partner, and permission to own a property. Three-fourths of Qatar’s population are foreigners, according to the Qatar Statistics Authority (QSA). About 82% of the population lives in Doha and Al Rayyan.
Qatar National Bank (QNB), the country’s leading financial institution, offers home and land financing at rates as low as 3.5%. The maximum loan offered to expatriates is QAR3 million (US$824,000) with a term of not more than 15 years. One can borrow up to 70% of the value of the property.
Demand is plunging
Demand continues to fall. In Q2 2020, transaction volumes for residential houses fell by 26.2% from a year earlier, its fourth consecutive quarter of y-o-y declines, according to leading consulting firm ValuStrat. The total value of residential transactions stood at QAR 2.6 billion (US$714.1 million) in H1 2020.
At The Pearl-Qatar and West Bay Lagoon, residential purchases dropped 20% in H1 2020 from a year earlier. Likewise, the total value of transactions in these developments also fell by 32.1% y-o-y to QAR 467.6 million (US$128.4 million). Transactions started to decline in March 2020 but showed signs of improvements in June 2020.
In Q2 2020, the median transaction price for residential houses stood at QAR 2.5 million (US$ 686,625), down 10.7% from the prior year.
Supply continues to rise
The supply glut is now widening, as construction activity continues to rise despite falling demand. In the first half of 2020, about 2,250 apartments and 700 villas were added to the market, bringing the total stock to 300,550 units, according to ValuStrat.
- About 2,000 residential units were completed in The Pearl, Lusail, and West Bay.
- 157 apartments were completed in Musheireb Downtown Phase 1B.
- Al Shahed Tower were also launched, offering a total of 516 apartment units.
An additional 7,250 residential units are expected to be completed in the second half of 2020, bringing the total supply to almost 308,000 units by end of this year. Some of the notable developments in the pipeline include Abraj Bay Towers in Abraj Quartier in The Pearl; Al Mutahida Towers and Tower 24 in Viva Bahriya The Pearl; Al Darwish and Arwa Tower in West Bay, and; Amwaj Tower in Waterfront district, Lusail.
“Supply projections for 2020 have adjusted upwards to 10,000 units due to delayed deliveries in 2019,” said ValuStrat. “70% of the supply is projected to launch in prime locations such as Lusail, The Pearl and Al Dafna which might negatively influence the market rent in the areas once projects are handed over. Vacancy in secondary locations may increase as residents ´trade up´.”
The country has currently an estimated excess supply of 80,000 units.
Falling rents; moderate to good rental yields
Residential rents continue to fall. In Q2 2020, the residential median asking rent in Qatar dropped 2.2% from the previous quarter and by 5.2% from a year earlier, according to ValuStrat. Over the past two years, rents have already fallen by a cumulative 14%.
In Q2 2020:
- For apartments, the median monthly asking rent was QAR6,560 (US$1,802), down by 2.6% q-o-q and 5.4% y-o-y. Prime locations such areas such as Al Sadd, The Pearl, and West Bay saw the biggest rent declines in Q2.
- For villas, the median monthly asking rent was QAR 10,890 (US$2,991), down by 0.5% q-o-q and 3.7% y-o-y. Prime areas such as Abu Hamour, Al Duhail, Al Gharrafa and Al Waab registered the steepest fall in rents.
About 59% of all occupied housing units in Qatar are rented, according to QSA. The average expat household in Qatar spends more than a third of its annual income on rent, according to Colliers International.
Gross rental yields for residential properties in Qatar range from 4.6% for villas to 6.2% for apartments in H1 2020, according to ValuStrat.
Mortgage market shrinking, despite falling interest rates
Qatar Central Bank has recently kept its overnight lending rate at 2.5%, following a 100 basis points rate cut in March 2020 in a bid to spur economic activity amidst the coronavirus crisis. During the same period the overnight deposit rate was kept unchanged at 1%, while the repo rate remained at 1%.
Despite this, the amount of real estate loans outstanding, which include land purchases, property developments, and residential and commercial buildings, fell by 1.4% to about QAR 152.66 billion (US$41.93 billion) in August 2020 from a year earlier.
The size of Qatar’s mortgage market was equivalent to about 23.1% of GDP in 2019, down from 25.2% of GDP in 2017 but a significant growth from less than 8% of GDP a decade ago.
Expats can borrow up to QAR3 million (US$824,000) with maximum tenure of 15 years. The loan-to-value (LTV) ratio is typically 70%.
Foreigners can buy in various massive freehold areas:
The Pearl is a QAR36.4 billion (US$10 billion) Riviera-style development, on a vast man-made island off the coast of Doha, the capital city. It provides over 40 kilometres of new coastline, linked to the mainland by a 4-lane, palm-tree lined highway. Doha’s international airport is only 20 km away. It was here that Qatar offered its first freehold properties.
Developed by the United Development Company, The Pearl-Qatar has 16,000 villas and 25,000 apartments.
West Bay Lagoon
West Bay Lagoon is a 2 million sq. m. private beachfront compound, centred on the Zigzag Towers. At the northern tip of Doha’s West Bay district, it is surrounded by artificial lagoons.
Barwa - Al Khor City
The Barwa - Al Khor project is a complete city, including seafront chalets, villas and elite apartments, covering 5.5 million sq. m. in Al Khor, 57 km north of Doha. The QAR30 billion (US$8.24 billion) Barwa Real Estate development will house 63,000 residents in 24,114 elite residential units. It also has hotels and sports facilities.
In March 2019, Law No. 16 of 2018 was passed, which effectively increases the number of freehold residential zones from 3 to 10.
The additional freehold areas include:
- Rawdat Al Jahaniyah
- Al Qassar (Area #60)
- Al Dafna (Area #61)
- Onaiza (Area #63)
- Al Wasail (Area #69)
- Al Khraij (Area #69)
- Jabal Theyleeb (Area #69)
“The recent reform to change freehold ownership law will contribute to a positive transformation of the real estate sector which will now embrace its cultural diversity through new initiatives designed to encourage investments and positively change business perspectives to ultimately result in overall economic growth,” said Pawel Banach of ValuStrat.
There are also 16 leasehold areas for foreigners
Foreigners can alternatively buy leasehold property for 99 years, renewable, in 16 designated areas, including the multi-billion dollar Lusail project, under Cabinet Decision No. 6 of February 2006. Foreigners can use the properties commercially or residentially, transfer the lease to another party, and sublet or rent.
Lusail City is an QAR164 billion (US$45 billion) waterfront community on the northern coast of Umm Salal, 15 km north of Doha. It is expected to house over 200,000 residents in 10 hotels, 3,000 villas, 12,000 apartments and retail areas.
Developed by Qatari Diar, Lusail will cover an area of around 21 million sq. m. This mega project, in 16 zones, will contain an Energy City costing QAR9.5 billion (US$2.6 billion), and an Entertainment City, costing QAR5.5 billion (US$1.5 billion). The Lusail Iconic Stadium is also expected to be built in the city. The massive development is planned to be completed by 2020.
Another mixed use development project is Al Waab City, owned by Nasser Bin Khaled Group, which covers about 1.2 million sq. m. Incorporating “green strategies” and sustainable design principles, it is estimated to cost QAR13 billion (US$3.6 billion). The development includes 2,411 residential units, 232,715 sq. m. of commercial space, and a 425 room hotel complex.
Another notable development is Asia Towers, which will have four 55-storey towers near West Bay. Each tower will contain about 1,600 residential apartments. Developed by Ezdan Real Estate Company, it is estimated to cost QAR2.5 billion (US$686 million).
Other leasehold property developments in Qatar:
- Musheireb (Area #13)
- Frij Abdul Aziz (Area #14)
- Doha Al Jadeed (Area #15)
- Ghanem Al Qadeem (Area #16)
- Al Rifa Al Hitmi (Area #17)
- Al Salata (Area #18)
- Fereej Bin Mahmoud (Area #22)
- Fereej Bin Mahmoud (Area #23)
- Rawdat Al Khail (Area #24)
- Al Mansoura & Fereej Bin Dirham (Area #25)
- Najma (Area #26)
- Umm Ghuwailina (Area #27)
- Al Khulaifat (Area #28)
- Al Sadd (Area #38)
- New Mirqab Al Jadeed & Fereej Al Nasr (Area #39)
- Doha International airport (Area #48)
Qatari economy continues to struggle
The Qatari economy expanded by a meager 0.8% in 2019, down from the prior year’s 1.2% growth and from annual average growth of 3.8% during 2012-16, according to the International Monetary Fund (IMF). In fact, this was far behind Qatar’s economic performance during the mid-2000s, when its economy grew by an average of 16.5% annually from 2004 to 2011. Qatar even performed well despite the global crisis, with double-digit growth rates of 17.5% in 2008, 13.1% in 2009, 17.7% in 2010, and 11.3% in 2011.
The economic blockade to Qatar in early June 2017 made by several countries including Saudi Arabia, United Arab Emirates, Bahrain, and Egypt, has severely hit Qatar’s economy. The economy contracted by 1.5% in 2017, its worst performance since 1991 and the first decline in 24 years. The participating 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 includes curbing diplomatic ties with Iran and shutting down Al-Jazeera. Qatar refused to comply, stating that it will 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.
Now the COVID-19 outbreak is aggravating the crisis in the region. Recently, the IMF revised down its 2020 economic forecast for Qatar, projecting a contraction of 4.5%, instead of the earlier estimate of -4.3%.
Qatar’s merchandise trade balance surplus plunged 61% to QAR 15.5 billion (US$ 4.26 billion) in Q2 2020 from a year earlier, according to Planning & Statistics Authority. Total exports plummeted by 42.8% y-o-y to QAR 37.8 billion (US$ 10.38 billion) in Q2 2020 while imports dropped 15.2% to QAR 22.3 billion (US$ 6.12 billion).
From 2017 to 2019, Qatar had one of the highest current account balances as a percentage of GDP in the region ranging from 3.8% to 8.7%.
In 2019, the country saw a budget surplus of 0.9% of GDP, following a surplus of 2.2% of GDP in 2018 and deficits of 6.6% of GDP in 2017, 9.2% in 2016 and 0.7% in 2015, according to the Qatar Central Bank (QCB). However the country is expected to return to a deficit, estimated at 5.9% of GDP, as hydrocarbon revenues plunge due to collapsing energy prices, according to Fitch Solutions.
In 2019, external debt amounted to QAR 196 billion (US$ 53.8 billion), up 25.6% from a year earlier, according to QCB. As percent of GDP, Qatar’s government gross debt increased to 56.2%, sharply up from 46.5% in the previous year, based on figures from the IMF. Debt is expected to rise further to about 68.1% of GDP in 2020, mainly due to pandemic-related measures.
In August 2020, inflation stood at -2.97%, the 23rd consecutive month of falling consumer prices, according to the MDPS.
Unemployment was 0.1% in 2019, unchanged from a year ago and the lowest level in the Middle East, according to the MDPS. Qatar’s highest-ever unemployment rate was 3.9%, seen in December 2011. This year, the jobless rate is projected to rise to 0.4% due to the pandemic.
- Real Estate Price Index (Qatar Central Bank): http://www.qcb.gov.qa/English/Publications/Statistics/RealEstate/Pages/RealEstatePriceIndex.aspx
- Q2 Real Estate Market Review (Cushman & Wakefield): https://cushmanwakefield.qa/wp-content/uploads/2020/07/Q2-2020-Cushman-Wakefield-Qatar.pdf
- Qatar Real Estate Market First Half 2020 Review (ValuStrat): https://valustrat.com/wp-content/uploads/Qatar-Real-Estate-Market-H1-2020-Review.pdf
- 8,600 residential units may be added in Qatar by end-2020 (ValuStrat): https://valustrat.com/media-relations/8600-residential-units-may-be-added-in-qatar-by-end-2020-valustrat-gulf-times
- Qatar Review 2019-2020 Vision (ValuStrat): https://valustrat.com/wp-content/uploads/Qatar-Review-2019-2020-Vision-f.pdf
- Qatar entices foreign buyers amid oversupply in housing market (The Real Deal): https://therealdeal.com/2020/10/10/qatar-entices-foreign-buyers-amid-oversupply-in-housing-market/
- Qatar loosens restrictions on foreign property ownership (Al Jazeera): https://www.aljazeera.com/economy/2020/10/6/bbqatar-loosens-restrictions-on-foreign-property-ownership
- Ministry launches special section on website for non-Qatari real estate ownership (The Peninsula): https://www.thepeninsulaqatar.com/article/07/10/2020/Ministry-launches-special-section-on-website-for-non-Qatari-real-estate-ownership
- Qatar’s residential supply totalled 300,550 units in June: ValuStrat (Gulf Times): http://desktop.gulf-times.com/story/672710/Qatar-s-residential-supply-totalled-300-550-units-in-June-ValuStrat
- Monthly Monetary Bulletin (Qatar Central Bank): http://www.qcb.gov.qa/English/Publications/Statistics/Pages/MonthlyBulletin.aspx
- Rates & Ratios (Qatar Central Bank): http://www.qcb.gov.qa/English/pages/interestrates.aspx
- Property ownership law a big boost for real estate sector (The Peninsula): https://thepeninsulaqatar.com/article/19/03/2019/Property-ownership-law-a-big-boost-for-real-estate-sector
- Main Economic Indicators (Qatar Central Bank): http://www.qcb.gov.qa/English/Publications/Statistics/Pages/EconomicIndicatros.aspx
- Quarterly Statistical Bulletins (Qatar Central Bank): http://www.qcb.gov.qa/English/Publications/Statistics/Pages/Statisticalbulletins.aspx
- World Economic Outlook Database, October 2020 (International Monetary Fund): https://www.imf.org/en/Publications/WEO/weo-database/2020/October/select-subjects?c=453,
- Qatar To Post Budget Deficit As Hydrocarbon Revenue Halves (Fitch Solutions): https://www.fitchsolutions.com/country-risk-sovereigns/economics/qatar-post-budget-deficit-hydrocarbon-revenue-halves-19-05-2020
- External debt for Government of Qatar in Million QR (Qatar Central Bank): http://www.qcb.gov.qa/Arabic/Publications/Statistics/Documents/ExtrenalDebt2019_En.pdf
- Press Release on Quarterly Foreign Merchandise Trade Statistics Quarter 2, 2020 (Planning & Statistics Authority): https://www.psa.gov.qa/en/statistics1/Pages/LatestStats/23082020.aspx
- Qatar's housing market remains depressed - June 19, 2017
- Qatar's housing boom has suddenly halted, despite amazing yields - August 20, 2016