Qatar residential and office markets come under pressure
Latest report shows that boosting effect of the World Cup has largely dissipated – rents are dropping significantly in many districts
A report from global real estate consultancy Knight Frank shows that the housing market in Qatar faces challenges, as a fall in demand for residential properties is coupled with a rise in supply following the construction boom linked to the FIFA World Cup 2022.
‘The Qatar Real Estate Market Review for Spring-Summer 2023’ showed that rents are dropping in the majority of districts, with Lusail’s Waterfront and Fox Hills districts experiencing the highest quarterly depreciation of 23% and 18% respectively.
The municipalities of the capital Doha and Al Rayyan recorded the highest volume of residential transactions during the second quarter, it added.
Faisal Durrani, Partner, the Head of Research, Middle East and North Africa, Knight Frank said, “The supply-demand imbalance, rising interest rates, and affordability challenges are contributing to a shrinking mortgage market and impacting the volume of home sales, while also undermining residential values. Indeed, the total number of residential sales transactions has fallen by 36% over the last 12-months. Simultaneously, the total value of residential transactions has declined by 24%.”
Durrani pointed out that the sharp decline in rents would undoubtedly put landlords under pressure to remain competitive, particularly as the Knight Frank’s 2023 Destination Qatar report shows that Qatari high net worth individuals most prefer Lusail for a residential acquisition, with an average budget of $1.8mn.
“Among the HNWI we spoke to, 71% already own a home in Lusail. Additionally, Lusail Marina and Lusail Waterfront were identified as the two most favoured locations for residential real estate acquisition. Moving on to rental yields, during Q2 2023, the gross single-let rental yield for residential properties in Qatar averaged 6%. Apartments had a higher yield of 6.4%, while villas yielded slightly lower at 4%,” he added.
On its office market, Knight Frank said there were challenges in this sector too, which is experiencing a widespread drop in average rental rates.
Adam Stewart, the Partner and Head of Qatar, Knight Frank explained, “Despite strong demand from the public sector and oil and gas industries, the Qatari office market’s biggest challenge is an oversupply of office space, which is undermining rents, leaving occupiers firmly in the driving seat. Notably, the public sector is driving most of the activity in Qatar, particularly in Lusail.”
