Qatar's increasing property prices to push rentals higher

Unjustified increase in the prices of properties, especially plots of land, has pushed rentals through the roof, for housing units and commercial space.

If the trend continues, rentals may increase by 10 percent by year-end, say experts from the industry.

Analysts believe indiscriminate rise in the prices of properties is not only putting inflationary pressure on rentals, but also negatively affecting supply, as developers are discouraged to start new projects due to thin profit margins and lower levels of expected returns on investments, local Arabic daily Al Raya reported yesterday.

They say that despite high demand and shortage for housing units and commercial space, real estate transactions during the third quarter of the year remained low, largely due to the high prices of properties.

Many investors see the prices highly inflated and fear price bubble in the real estate market.

“The market slowed down in Q3, 2014, and the same trend is expected to continue over the next couple of months. Sales may pick up momentum only in the beginning of next year,” Khalifa Al Musalman, an real expert was quoted as saying.

He said: “Since the prices of plots of land and other properties have gone through the roof, developers and investors are finding them less attractive to invest as they expect a very negligible profit margin on their capital.”

He said investors are also reluctant to put their money in new projects due to inflated prices. This is the reason the real estate market has slowed down, he added. “If Lusail and Pearl-Qatar transactions are excluded, the combine value of weekly deals will not be more than QR200m,” he said.

Al Musalman said at a time when the country needs more housing units, developers are withholding their projects and investment decisions, hoping for the prices to come down.

Referring to reports, Al Raya said even the prices of high-end apartments, such as those in the Pearl-Qatar and Lusail have increased, and may continue to go up further next year.

Experts suggest that there is an urgent need of intervention by authorities to develop new cities and provide basic facilities in dedicated areas on the outskirts of Doha and its suburb on a public-private partnership model.

“Rentals for properties, including housing, will increase by about 10 percent in the second quarter.

“Most of the rise in rentals has been witnessed in newly-built  properties,” Sheikh Fahad bin Hamad Al Thani was quoted by local Arabic daily Al Watan.

Sheikh Fahad also suggested that the government needs to come out with amicable solutions to control the rising prices of properties at the earliest, and new areas should be developed for housing and related projects to ease pressure on the existing areas. [The Peninsula]