Wednesday 27 / November / 2024
Muscat: Buoyed by higher oil prices, Oman’s economy is recovering well from the lows of 2016, and is projected to grow by 3.6 per cent in 2018. If sustained in the longer term, this growth is expected to have positive impacts across the Sultanate’s property market, according to leading international real estate consultancy, Cluttons.
Cluttons’ Muscat Spring 2018 Property Market Outlook indicates the government’s strong push to boost overall economic growth has resulted in a number of very encouraging developments for the property market, such as the much-anticipated decision to allow the creation of a real estate investment fund (REIF). This will pave the way for investments in larger scale real estate projects at significantly lower price points and with far greater liquidity, in comparison to more traditional real estate investment.
“The increased ability of both institutions and individuals to invest in income-generating real estate assets has the potential to provide a significant boost to the real estate sector in Oman, particularly since the regulations require that at least 75 per cent of a REIF’s assets must be invested in the Sultanate,” Faisal Durrani, Head of Research at Cluttons, said.
“This would further open up opportunities to a significantly wider market interested in investing in real estate at low entry price points. The REIFs law may well provide the impetus needed by developers to shift their strategic development focus from local to global,” he added.
Tourism sector outlook
Cluttons’ report shows that away from oil and gas, the Sultanate’s tourism sector remains one of the most vibrant segments of the economy with arguably the highest untapped potential. The country was ranked 18th globally for its potential for tourism growth to 2028, according to a recent report by the World Travel and Tourism Council.
“The travel and tourism sector’s contribution to Oman’s gross domestic product (GDP) is forecasted to grow by 6.3 per cent in 2018 and then by an average of 5.9 per cent per year to 2028, to reach a value of OMR3.3 billion — accounting for a contribution of 8.9 per cent to total GDP. We view this projected improvement as a seismic shift in the fundamental makeup of the Sultanate’s economy and certainly one that puts the economy on a path to more widespread diversification,” said Durrani.
According to Cluttons, the projected increase in tourist arrivals is expected to be supported through the successful opening of the new terminal at Muscat International Airport in March, which has made entering and exiting Oman a more pleasant and efficient experience. The increased capacity is likely to attract new airlines to include Muscat in their networks.
Residential market
Cluttons’ report highlights that rental rates in Muscat appear to have stabilised, with a marginal 1.1 per cent decline in average rates in the three months to the end of March. The largest drops in rental values during the first quarter were seen in Azaiba, Ghubrah North, Muscat Hills and Madinat Sultan Qaboos, while Bausher, Shatti, Al Qurum and Qurum registered a rent rise.
The report expects demand, in the short to medium term, to be impacted by the Ministry of Manpower’s decision to temporarily ban the issuance of work permits to expats in key sectors. “However, if we continue to see gains in oil prices, the economy will continue to be driven upwards, ultimately boosting the residential market, particularly in terms of demand,” said Matthew Wright, Head of Consultancy and Industrial at Cluttons Oman.
“In testing times, landlords’ primary aims should be to generate demand and drive occupancy rather than achieving the highest rental values,” he added.
Overall, Cluttons expectsthe residential market in Muscat to remain stable for the remainder of 2018.
Office market
According to Cluttons’ report, office rents remains flat, with average headline rents holding steady in the city’s key submarkets during the first quarter of 2018. This follows stagnation during 2017, with the exception of the CBD area, where rents dipped by 250 baisa to OMR2.75 per square foot (psm) at the end of last year. CBD retains its position as the cheapest submarket to rent an office in Muscat.
“Even in a market that has faced uncertainties and setbacks in the form of a demand slump following the shock oil price rout four years ago, there are still occupiers who are drawn to high quality buildings and are committed to upgrading space,” commented Wright.
Overall, as with the residential market, continued increases in oil prices are likely to add impetus to the sector, particularly in terms of demand. Cluttons’ report does not expect any increase in rental values over the course of 2018.
