Despite a strong start to 2023, Knight Frank reports that Qatar's residential market faces challenges due to a fall in demand for homes and an increase in supply following the construction boom tied to the FIFA World Cup 2022.
RENTS DIP IN KEY DISTRICTS
Rents have fallen in many areas, particularly in Lusail's Waterfront and Fox Hills districts. These areas experienced the highest quarterly rent drops, with a 23% and 18% decline in respective average apartment rents. This is according to Knight Frank's Qatar Real Estate Market Review for Summer 2023.
DOHA AND AL RAYYAN LEAD RESIDENTIAL TRANSACTIONS
During the second quarter, the capital city Doha and Al Rayyan saw the highest number of residential property transactions, Knight Frank notes.
CHALLENGES IMPACTING THE MARKET
Faisal Durrani, Partner and Head of Research, Middle East and North Africa, highlights that factors like supply-demand imbalance, rising interest rates, and affordability issues are causing a decline in the mortgage market and affecting home sales and values.
Durani also highlights a 36% fall in sales in Qatar's residential market over the past year. This means that the total value of transactions declined by 24%.
PRESSURE ON LANDLORDS
Durrani mentions that the sharp drop in rents is putting pressure on landlords to stay competitive. Knight Frank's 2023 Destination Qatar report shows that Qatari high-net-worth individuals are drawn to Lusail for residential acquisitions, with an average budget of $1.8 million. Among the high-net-worth individuals surveyed, 71% already own homes in Lusail.
RENTAL YIELDS AND OFFICE MARKET
Moving to rental yields, residential properties in Qatar yielded an average of 6% for Q2 2023. Apartments had a slightly higher yield of 6.4%, while villas yielded 4%, Durrani adds. Knight Frank also notes challenges in the office market, with a widespread drop in average rental rates due to an oversupply of office space.
PUBLIC SECTOR DRIVING ACTIVITY
Despite challenges, the public sector and oil and gas industries are driving demand. The public sector is particularly active in Lusail, where authorities are relocating entities. For example, Qatari Diar recently leased 6,200 sqm at The Qatar Financial Centre Authority’s Lusail Boulevard.
TOURISM SECTOR GROWTH
After successfully hosting the 2022 FIFA World Cup, Qatar's tourism sector continues to grow. Visitor numbers increased by 206% in the first five months of 2023, reaching 1.77 million compared to the same period last year.
Despite increased arrivals, average hotel occupancy fell from 58% to 53% in the first six months of the year. This reflects an oversupply of hotel rooms compared to demand.
QATARI REAL ESTATE: LOOKING AHEAD
Challenges in Qatar's real estate markets persist with declining rents, oversupply, and changing demands shaping the landscape. So on a short-term time horizon, investment opportunities in Qatar are uncertain. Yet, like real estate markets throughout the MENA region, the long-term investment potential remains strong in Qatar.