Soaring rents drive GCC boom
Manama, June 20, 2007
'Ridiculous' rises in rents across the GCC are encouraging more and more people to buy property, senior figures from a top UAE-based property firm said.
Three experts from Asteco Property Management, which is overseeing its local flagship project Marina West from a recently-opened Bahrain office, said there was no end in sight for the Gulf real estate boom.
Asteco director of sales and leasing for the region James Knowles, director of regional offices Tony Ahad and senior property consultant Khalid Al Khaja said a high-uptake of apartments currently being offered as phase one of the Marina West development in Budaiya was symptomatic of an increasing demand from customers seeking to own their own property.
'Rents have gone up ridiculously in the last 12 to 18 months and one of the solutions is that people buy something for the future,' Al Khaja said, revealing 46 per cent of Marina West's first phase has already been snapped up by investors.
'There are all sorts of inflationary pressures with things like rental rises. Dubai's market has moved 40 per cent year on year - now, there have been some decrees put in place for rental caps, which have helped - but in a place like Qatar you are looking at $2,000-$4,000 a month for a one-bedroom apartment.
If a young couple comes in with a family you are looking at $5,000 to $6,000 just to live. We thought Dubai was an expensive place but Qatar far outshines Dubai, it is two to three times as expensive. That is just simple supply and demand - there are way too many people seeking a supply that isn't there yet, so there is huge pressure on rentals,' Knowles explained.
'I think the GCC property boom is well-known and part of it is being driven by speculative play and part of it is being driven by the need of people to live somewhere nice without the worry of a landlord putting their rent up 40 per cent,' he added.
He revealed that a desire to escape high rents, and instead take advantage of new 25-year mortgage agreements, was a key driver among those buying apartments at the Marina West development - and predicted further rises in rental prices.
'We are tailoring for people who would like to stay for at least a few more years, but don't want to live in rented accommodation and watch the market go up and up. There are two or three more years of pressure on rentals - I think it's probably the perfect time to buy in markets like Bahrain, Qatar and Dubai,' he said.
Knowles also criticised the 'doomsayers' predicting a dramatic crash for the region's real estate industry, and backed the GCC's current unprecedented boom to continue.
'Doom makes a good story, so that gets people's attention. But if you look at the places within a two or three hour flight time from say Dubai - and look at the population of people who want to live in a comfortable environment like Bahrain or Dubai or Abu Dhabi it is enormous. It's huge.
'Then within that huge region you have got regional hubs like Dubai which wants to be a tourism and services hub, Bahrain with its financial hub, and Qatar with its energy hub, and there is an enormous amount of growth.
'It's not built on debt - it is built on real money that comes out of the ground everyday at $70 a barrel,' he said.
He revealed Asteco - a firm with a 27-year history in the region - was already on target to beat its best-ever results, recorded in 2006, by third quarter of this year.
'It is supply and demand, which is chapter one of the real estate book. Look at somewhere like Dubai - 2010 at best is a probably a reasonable estimate as to when demand will catch up with supply - and that is only presuming moderate growth, and I think it will be stronger than that,' he said.
Construction work has already begun at Marina West, the only high-profile development currently being built on the west of Bahrain, with the project expected to be finish
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