Qatar follows Dubai in opening up

Last Updated: Sep 14, 2007

Qatar follows Dubai in opening up

Qatar is one of the richest countries in the world. It has more than 15% of the world's proven gas reserves, and its wealth has grown at breakneck speed during the past 15 years, particularly since the Iraq War.

It is in the middle of an extraordinary economic boom.

Official ‘real’ GDP growth figures (7.1% GDP growth in 2006, 5.5% in 2005, 9.3% in 2004) understate growth. Nominal GDP has been growing much faster (18% in 2006, 34.5% in 2005, 20% in 2004), due to oil revenues. The so-called ‘GDP deflator’ method of measuring ‘real’ GDP growth, by which national authorities treat increases in oil prices as a kind of inflation and simply discount them, disguises a really tremendous increase in wealth, almost all of which goes into the government’s coffers.

The government has set a nominal GDP target of US$69bn by 2011, up from US$48 bn in 2007, which implies an annual GDP growth of over 9% till 2011. The fast pace of economic growth is expected to continue over the medium term, with gas exports planned to quadruple during the next 6 to 8 years.

The government is spending QR25bn (US$6.69 bn) on infrastructure during 2005-2009. This includes the initial stages of a US$5.5bn new international airport, and 32 road projects worth QR13bn (US$3.57 bn). The QR2.2bn (US$0.6 bn) Olympic Games Village will be turned into Hamad Medical City, with 4 hospitals. Other landmark projects include a Museum of Islamic Arts, the National Library, Photography Museum, and redeveloping the Qatar National Museum.

The country has been actively attracting foreign investors, for instance through its Qatar Financial Centre (QFC), which offers three-year tax holidays, full repatriation of profits and 100% foreign ownership. The focus is on Qatar’s economy going global, the internationalization of Qatar, and democratic political reforms and increased freedom of expression are being introduced in parallel. There have been large inflows of highly paid expatriates, and rapid industrial expansion.

The government has been very supportive of the real estate sector. Expatriates, who on an average stay in Qatar for 8-10 years, are the target market for many projects. According to some estimates, the number of families expected to shift to Qatar in the next 2-3 years is 200,000, while around 500,000 families may move in by 2012.

Qatar’s population is small. Foreigners - including labourers attracted by a construction boom - outnumber natives, who number about a quarter of Qatar’s 910,000 population at the beginning of 2007. Qatar had a compound annual population growth rate of 4.9% in the 10-year period 1996-2005, and 5.2% in the five year period 2001-2005.

Oil money funds an all-embracing welfare state, with many services being free or heavily subsidized.

Opening up property to foreigners

The country has followed Dubai’s example in offering ownership of property to foreigners in select areas in Qatar, including the Pearl Island, West Bay Lagoon, Al Khor Resort, and the Lagoon Plaza projects. From February 2006, 18 more areas were opened up to property leases by non-GCC nationals, on a 99-year renewable basis. Foreigners who lease can use the properties commercially or for their benefit, transfer the lease to another party, sublet or rent. The first residential zones are planned to be complete by the first quarter of 2008.

Qatar issues permanent residence visas to foreigners buying freehold property in selected housing projects. The visa remains valid as long as the foreigner keeps the property in his name.

“I’ve never seen anything like this. It’s as if Doha had suddenly been discovered, everyone wants a bit of the action,” says Janet Parry of Direct Real Estate, Qatar.

“At present there are only 10 high rises, well there are plans for a further 180,” says Parry. “The place is full of engineers and contractors, roads and new hotels being built. There are loads and loads of money. It’s just boom time for Qatar.”

Residential buildings accounted for 87% of total completed buildings in 2004. Most new residential units are in the Al Rayyan area, followed by Doha and Umm Slal.

The Pearl

The first project marketed to foreigners was the Pearl – a large man-made island of around 4 square kilometers, just off the coast of Doha. It will house some 30,000 people in over 7,600 homes. The theme is ‘Riviera-style’ i.e., an integrated mix of water and land, with 4 marinas, luxury hotels, schools, community centres and parks. The island will provide over 40 kilometres of new coastline, and will be linked to the mainland by a 4-lane, palm-tree lined highway (Doha's international airport is only 20 kilometres away). The first building will be ready in summer 2008, with full completion expected in 2010.

Lusail

Qatar’s biggest project is the 35 square kilometre US$5.5 billion Lusail waterfront city. just north of Doha, next to The Pearl, which was announced in December 2005, which will house over 200 thousand people by 2010. Two marinas, ten resort hotels, two golf courses, 3,000 villas, 12,000 apartments…the listed goes on. Foreigners can buy 99-year leases, though a few of the units will be sold freehold.

Another development, Al Waab City, will provide housing for 10,000 people in 2,200 residential units, with commercial space and a hotel, all stretching over 1.2 million square metres.

Despite these ambitious projects, many argue that Qatar will fall far short of fully satisfying demand. “Considering the economic boom that the country is currently experiencing, and the huge inflow of expatriates, supply is extremely deficient in the residential sector at present,” notes a September 2006 report by the Kuwait-based Global Investment House.

“Higher wealth and spending capacity of the population have also allowed for greater appreciation in prices and rents. We do not expect the demand/supply gap in the residential sector to narrow in the short term. Rents for high end properties are expected to remain high, while that for low to middle end properties could correct in course of time.“

Rents are at an all time high in Doha. A one bedroom apartment can range anywhere from $2,000 to $4,000 per month. Large companies sometimes rent entire residential buildings on package deals to house their employees. Qatari investors are also active buyers in new developments, investing with the intention of renting out their properties.

The price of land keeps going up in response. Two years ago land typically was sold at around QAR30 per sq. m., now it us up to QAR120 (US$33) per sq. m.

“You can see something in the morning, it will be gone in the afternoon,” says Parry. “Buyers are coming from Seychelles and America…these are very sophisticated people, not your average Brit or American who don’t know where Qatar is. Everyone has heard about the success of Qatar and they want a piece of the action.

“Dubai is old hat. It is no longer going to be possible to make easy money. Qatar is new and emerging. This is the place to be.”